What is succession planning for business owners? How does this affect the short and long-term interests of your company and its value? Why should you be concerned about succession planning if you own a business or have a significant interest in an LLC, S-Corporation, or C-Corporation?
Key Takeaways about the Importance of Business Succession Planning:
- Business succession planning safeguards the value and continuity of your company in the event of unexpected events, such as accidents, health emergencies, illness, incapacitation, or loss of life.
- Succession planning enhances the value of your company by ensuring smooth and profitable operations through any challenge, thereby avoiding the loss of business or a forced sale of the company for less than its worth.
- Succession planning reduces capital gains and estate taxes. Family or revocable trusts hold business interests to minimize taxation and protect this valuable asset from creditors.
Your business is a valuable asset, often one of the most valuable assets you own or control. It is not only an income-producing venture, but it is a legacy you can leave to your heirs and beneficiaries. You have poured your life's work, energy, time, and money into your company. Doesn't it make sense to protect that company and position it to seamlessly transfer to your designated beneficiaries or to ensure its ongoing successful operations if you become incapacitated or in the event of your passing?
Who will manage your business interest(s) if you are seriously injured in an accident or experience a health emergency? Have you considered disability insurance to protect against the loss of any key manager or employee (including yourself) resulting from injury, illness, or an unexpected death? What insurance may be required to protect your ownership interests and fund related buyouts or protect your family's interests while funding a buy-sell agreement? Have you considered "key person" or "business interruption" insurance options? All of these options can protect both the ongoing operations of your business and the company's value.
A strong, well-crafted business succession plan takes advantage of trust and estate planning to protect or freeze the value of your company and transfer ownership to a spouse or other heirs without triggering taxable events. How will an ownership interest be protected and preserved within the family trust or other estate planning vehicle(s) to provide a reduction in tax exposure through income splitting or the division of transferred value?
Succession planning for business owners ensures that your company is protected in the event of unexpected events in your life and the lives of other key personnel. It provides a plan that protects all you've worked so hard to build, while allowing your spouse, heirs, and beneficiaries to retain and transfer ownership interests, or sell them in a controlled, profitable manner that retains value while reducing the impact of taxation. Preserving the value of all you’ve invested and ensuring smooth transitions are key advantages and necessities of succession planning for business owners.
Look for an experienced tax, legal and estate planning team that will discuss the trust and estate planning strategies to protect your business, reduce taxation, and provide for your financial retirement needs. This leads to deeper and more effective strategies you can rely upon.
