Business succession planning involves ensuring your company has future leaders and other critical employees ready to step into roles when necessary. It can involve identifying the right people for future roles and providing opportunities for those individuals to grow and learn. However, business succession planning is about a lot more than training.
Find out more about business succession planning below, including whether you may need to create a plan for your company. Discover how an experienced business law attorney can help you take care of the details necessary to protect your business.
What Is Business Succession?
At its most basic, business succession is the process of handing a role or company off to someone else (or some other people).
The overall term casts a wide umbrella, and all of the following situations are potential examples of business succession:
- The Director of IT is getting promoted to the VP of Technology for a firm. He or she is only successful in this move if there is someone who can step into the role of Director of IT at the right time.
- A business owner is ready to pass the business down to a child. This may involve ensuring that person has the knowledge and skills to take control of the business. It also includes changes to the ownership structure of the company.
- The CEO of a firm passes away, leaving the business in need of new leadership. Succession has to occur here, whether there is a plan for it or not.
Business succession planning refers to the work you do to proactively support a future succession. Typically, the idea is to create as seamless a transition as possible. You might plan for a specific time, such as when you retire and want to transfer a business to an heir. But succession planning also takes into account the unknown—such as what happens to the business or your department responsibilities if you pass away or become incapacitated?
What Are the Benefits of Business Succession Planning?
One of the biggest overall benefits of succession planning is that it provides peace of mind for the future. That’s true for the business owner, but also for stockholders, employees, suppliers, customers, and family.
According to Rutgers University’s guide to succession planning, the main stakeholders in any succession plan are the business owners, family, and employees. Those categories are further defined as:
- Business owners: Sole proprietors, partners, or shareholders
- Family: Typically the family of the person or people who own the business
- Employees: part-time and full-time staff, contractors, and, in some cases, management boards
When people know that you’ve engaged in comprehensive business succession planning, they can be more certain their careers or investments are safe—regardless of what might happen with one person within the business structure.
In addition to providing peace of mind for many people, business succession planning offers benefits such as:
- Planning for and protecting against taxes. The right steps toward ownership succession can reduce estate taxes and other burdens should a business owner pass away. Good succession planning also looks at what taxes might be unavoidable and creates a plan to handle them.
- Clear understanding about how the business should be distributed. In the event a business owner has numerous heirs, proactive succession planning makes it clear who might control the company in the future and what benefits others in the family can count on.
- Opportunities for advancement. Succession planning that looks toward the future leadership of a company encourages training and professional growth at all levels. This emphasis on growth creates opportunities for advancement that can help businesses keep top talent.
Who Might Need a Business Succession Plan
If you own a business, you probably need a business succession plan. That’s especially true if you:
- Want to pass the business on to children or other heirs in the future
- Have a personal brand tied to the business you want to protect
- Care personally about your employees and want to ensure they continue to see success even if you are no longer in charge
- Care about your customers and want to ensure they continue to receive the type of service or products you can stand behind
You might also want to consider business succession planning if you’re a leader within a company or department. Planning for new leadership at every level allows current leaders to retire, take promotions, or make changes in their careers that meet personal needs without worrying that they’ll leave people with no one in charge.
How a Business Law Attorney Can Help
Depending on the type of business succession planning you’re working on, consider seeking assistance from a business law attorney. A lawyer can help you plan to sell or transition ownership of your business while protecting your rights and interests—as well as the interests of your loved ones.
Some of the things a lawyer may be able to help with include sheltering your business, you, and your heirs from taxes where possible; ensuring contracts are as strong as possible to protect your interests; and ensuring you understand all your options for protecting your business now and in the future. Reach out to the team at Katie Charleston Law, P.C. to find out how we can help.