A family business is a significant device for the attainment of planned financial goals for the family. A lot of business owners opt for creation of trusts and succession plans in order to secure their families and finances from unforeseen circumstances. Thus, management of a family business is much more exigent and complex than securing its predetermined goals.
So, if you own a family business with a vast estate, it is significant that you devise a succession plan which is future-proof. Following are a few steps for the creation of a successful family business succession plan.
To begin with, family business succession is a process which includes the transition of the management or ownership of a family business to the next generation of family members.
1. Data collection
Data collection is the first step when it comes to planning a succession. When you set the transition of a business management in motion, you need to provide your attorney a record of certain information and documents such as party contracts, business governing documents, estate planning documents and vendor contracts. Once you collect this data and provide it to your estate planning attorney, he/she will review it and consider all the legal aspects to make it foolproof.
2. Decide who takes over
This is the second most significant step while planning a family business succession. Once you collect necessary information and evaluate the accurate valuation of your business, you need to decide who will take the reins of your business. While you may have a mutual understanding of who will take over, things need to be put on paper as soon as possible. Planning a family business succession is considered a taxing process as you need to address potential business interruptions in case of your sudden death. Therefore, having a reliable attorney is a must. Litvack Dessureault LLP avocat succession plans offer solidity and soundness in this regard.
Another significant factor is what happens if the person you elect chooses to exit the business. Who takes over in such a case. Therefore, the sooner you formulate such a plan, the better.
3. Creation of rules for governance
This is perhaps the most important step because here with the help of your attorney and accountants, you must develop rules to regulate the ownership of the business. Decisions like voting rights, board governance and executive authority must be effectively and smartly taken here.
While there are several other aspects to consider when planning a family business succession plan, the above-mentioned steps are some major points to keep in mind.