Start planning now for the survival of your business

Starting and growing a successful business is no easy task.  It takes years of hard work.  Now that you have reached a level of success, you can relax a little.  Well, not quite yet.  What happens to your business when you are gone?

Estate taxes.  The recent changes in the estate tax law have led many business owners to conclude that they no longer need a business succession plan.  Nothing could be further from the truth.  First, the major changes don't take effect until 2010.  Second, estate taxes should never be the driving force behind succession planning.  The reason you develop a business succession plan is to give your business the best chance of survival after you're gone.

Family issues.  Family issues are a critical part of any succession plan.  The first decision you must make is whether to sell the business or keep it in the family.  If the decision is for the family to retain the business, you must decide on ownership.  Are your children willing to take on the business, and if so, are they capable of running it?  Will it cause a family squabble if one or two children want to run the business, but others are not interested?

Resolving these issues may take a lot of honest, open discussion with family members to discover their true feelings.  If there is not an obvious family successor, other alternatives include selling the business to an outsider, promoting an existing employee to head the business while you retain ownership, or even selling the business to the employees.

Exit strategy.  An important part of any succession plan is the exit strategy for the owner.  Disability, retirement, death — these are all issues that must be addressed.  The timing of the transition depends on a number of factors, such as your age, health, retirement goals, and the readiness of a successor.  Consider whether you want to maintain some involvement with the business or make a clean break.

If you become disabled or die, do you want your spouse involved in the business?  If not, you should have a buy-sell agreement that spells out what will happen.  If you are going to sell your ownership in the business, how will you be paid?

The best way to insure the future success of the business you built is to plan for the time when you will no longer be there.