One critical component of estate planning is business succession. A business succession plan is designed to outline exactly what will happen and who will take over in the event that you pass on. Without a proper business succession plan, there may be significant confusion, especially in the case of a family business. Businesses need to keep operating smoothly, and for that, they need guidance. Here are four mistakes to avoid:
1. Trying to Include Everyone
With a small business or a family business, it can be very tempting to try to dole out equal shares to your family. However, it can also be more important to secure the future of the business rather than simply partition it out equally. After all, the business will not be worth anything if it cannot continue. Rather than trying to include everyone in the business itself, you can consider leaving behind other things of equal value to those who are less interested in the company.
2. Not Updating the Plan
People come and go. If your estate plan does not only include inheritance but also promotions and other managerial and administrative shifts, it's best that you update your plan on a regular basis. It's not only that some people may no longer be with the company -- their focus may have also changed or they may be in a position in their life where they are not looking to take on new responsibilities.
3. Failing to Discuss the Plan
Everyone involved in your business and its succession needs to be apprised of your decisions; otherwise, they may be caught by surprise. Moreover, training needs to be thorough and timely for anyone who is to take over a bigger role in your business. Discussing the plan beforehand also gives you the opportunity to answer any questions.
4. Not Properly Protecting Assets
An estate planning attorney really shines in the area of protecting assets. Many people focus too much on the actual mechanics of transferring their business and too little on protecting the assets of the business itself. With many small businesses, this can be very complex, especially if the business is not incorporated. If not properly protected, business assets could be included within the individual's estate and could even be dissolved to pay for personal debts.
If you have more questions about succession planning, you can contact an estate planning attorney. Estate planning attorneys are experts in determining the best possible ways to pass on your business without dramatic upheaval and without tax issues and other potential legal problems.