How should you establish your succession plan?

A proper business succession plan will provide for the survival and continuity of the business. It should minimize income and estate taxes, and it should also promote family relations through the fair treatment of all the children and identification of the expected decision-making process.

The first step in formulating a successful family business succession plan is to assemble the succession planning team. In addition to the appropriate family members, professional services of your attorney, accountant, financial planner, and insurance professional is required. Each team member brings different knowledge and expertise to the table. Participation of the family is of utmost importance to identify the planning goals of the family. These goals form the crux of the planning, and may include such issues as the maintenance of jobs for children, holding on to managerial control, or the transfer of control to specific family members. The establishment of the goals provides the highway upon which the planning team will travel.

A thorough analysis of the status of the business needs to be undertaken, including historic financial documentation. Legal documents must also be reviewed, including Shareholder and/or Partnership Agreements, Employment Contracts, Articles of Incorporation, IRS elections, Marital Property Agreements, Wills, Trust Agreements, and Deferred Compensation Agreements. Estate and wealth transfer taxes need to be projected and planned for. Once the succession team has identified the plan, it needs to be shared with the family and then implemented.