Will Your Business Survive Without You?
October 26, 2016
As seen on WJAR NBC 10 Smart Advice
Did you know that only 30% of family businesses are successfully passed on to the second generation?
Business owners and family members face unique challenges when events, such as forced retirement, health reasons, incapacity or death, happen unexpectedly, causing a transition in ownership. Creating a solid business succession plan is the best way to protect the value of the business from these risks, whether family members continue to operate the business or not.
There are four primary aspects to a good business succession plan.
- First, the business owner must determine the best ultimate ownership structure, identifying intended future owners and percentage interests. Selection of a financial agent, executor and/or trustee is critical for a business owner and these roles require special skills for overseeing business operations.
- Second, the business owner must decide how the business will be controlled and managed when the owner is no longer available. Advance preparation of successor leaders who are ready and able to step into the owner’s shoes increases the odds of a successful transition.
- Third, it is essential that provisions are made for sufficient liquidity to continue operations. Owners often contribute personal funds and profits back to the business and this source of funding will change after the owner’s incapacity or death.
- Fourth, tax issues should be considered and addressed both inside the company and in the business owner’s estate.
For smart advice that’s focused on your unique financial goals, contact Washington Trust Wealth Management at 800-582-1076 or send us an email.