Succession planning can be a complex topic to tackle for family businesses. It can also get complicated and emotional depending on the family and business dynamics.
Succession plans aim to protect your business, its assets, and your family’s legacy.
For families, succession planning can help to ensure a smooth transition of ownership and operations of the family business. It can also help to protect assets and optimize your and your family’s tax situation.
A well-crafted succession plan helps define the family business’s legacy and ensures that the right family members have the necessary skills and resources to continue the legacy.
The advantages of succession planning as a family
Prepares family members
Succession planning can help prepare family members for taking over the business. It offers an opportunity for them to gain knowledge and experience, ensuring they are well-prepared when it is time to take on a leadership role.
Protect assets and optimize tax situation.
For many business owners, the business can be a significant source of their net worth.
Succession planning can help protect assets in the family business. By setting up a succession plan, you can address any legal and financial implications while minimizing taxes through the transfer of assets.
It can also optimize the family’s tax situation by laying out strategies to reduce taxes and ensure the most efficient transfer of ownership and investments.
Ensure continuity and stability.
Succession planning helps ensure that your family business’s legacy continues. A well-crafted success plan will ensure the continuity and stability of the business by considering the orderly transfer of management and operational responsibilities as necessary. A clear plan can avoid conflicts in your business and family.
Can help build the legacy
Succession planning can help to build and preserve the legacy of the family business. By laying out a plan for the future, you are ensuring that the memory and impact of your business will live on for generations to come.
Creates a holistic plan
Succession planning is not just about the transfer of ownership and assets. It is also about creating a holistic plan that considers all aspects of the business, including operations, finances and personnel. With this holistic approach, you can create a plan tailored to your particular needs and goals.
By developing a comprehensive succession plan, you can ensure that your family business can thrive for generations. With careful consideration and a structured process, you can create a plan to help protect assets and optimize the tax situation while building a legacy that lives on.
How to get the process started?
Once you decide to implement succession planning for your family business, thinking about how to bring the plan to fruition can be overwhelming. Proactively thinking through the succession plan can help ensure that the plan is appropriately executed when the time comes.
Identify your business objectives.
The first step is to consider the business’s current and future needs.
You should also assess which skills and resources are necessary to run the business in the future successfully.
This includes determining what roles to fill in the company and who best fits these roles. It might also be necessary to consider family members’ interest in the roles you picture for them.
Create a succession plan for your family business.
Next, you should create a plan for transferring the business’s ownership, management and operational duties.
This step includes deciding who will take over operations and ownership when current owners retire or step down from their roles.
A plan should also be to identify and develop the necessary skills to ensure smooth management and ownership transitions.
If the plan includes a transfer of assets, you will want to ensure that all parties have adequate resources to execute the transfer. And that the strategy for the transfer is optimal in terms of tax and financial planning for everyone involved.
Have a contingency plan.
A succession plan involves a long-term solution for your business. It can take months, maybe even years, to implement the plan.
In the meantime, unexpected events may occur. It is vital to have a contingency plan to ensure that the business can still function should any of these events occur.
Formalize the plan
Finally, you should create a will or trust to protect the assets of the family business and secure its legacy. Creating a formal structure around the plan is essential in succession planning.
The structure allows everyone to consider the plan for themselves and ensures that it can be executed without too many hiccups when the time comes. Formalizing the plan can also provide the necessary individuals with an opportunity to be prepared and raise concerns to avoid conflicts in the future.
Schedule regular reviews
Once a formal plan is in place, reviewing and adjusting the succession plan with regular check-ins is essential. This will help to ensure that the goal remains relevant and considers the current state of the business and the family’s wishes.
Any trusted advisors such as accountants, financial advisors, and legal or tax professionals should also be kept up to date if the plan changes.
Get professional advice
A successful succession plan will involve many parties in your family and potentially experienced professionals who can be trusted advisors. The advisors may include accountants, financial advisors, and lawyers who can help you navigate business transfers’ legal and financial aspects.
Succession Planning for the Family
There is no one-size-fits-all approach to succession planning for family businesses. Each business and family has unique needs, goals and objectives, which should be addressed when creating a plan. Consulting with experienced professionals can help you develop an effective program that meets your needs.
By planning for succession now, you can ensure a successful transition of ownership and management for years to come. A well-crafted succession plan is vital in protecting your family’s business investments and legacy.
Contact Ford Keast Wealth Management in London, Ontario, for all your Succession Planning Needs
At Ford Keast LLP, our wealth management experts work with businesses of all sizes to advise on your business and estate planning needs. Our professional tax consultants and wealth advisors can guide you on family trust creation and its tax considerations. To learn more about how Ford Keast LLP can provide you with the best financial expertise, contact us online or by telephone at 519-679-9330.
