Your efforts as a business owner have contributed significantly to the expansion and prosperity of your enterprise. However, it’s crucial to consider the long term and create a plan to help ensure that your company survives when you pass away or retire. Putting in place a business succession plan is one method to achieve that.
The Power of Attorney
One of the first steps in creating a business succession plan is to establish a power of attorney. This legal document allows you to appoint someone to make decisions on your behalf if you become incapacitated. A power of attorney can include managing your assets and investments, paying bills, and making other important decisions.
We believe when it comes to business succession planning, a power of attorney is especially important as it allows your agent to step in and make decisions about your business if you are no longer able to. This includes making decisions about hiring, firing, and day-to-day operations.
Without a power of attorney, there may be legal battles to determine who has the right to make these decisions, which can lead to significant disruptions in your business operations.
Will
We feel another critical aspect of a business succession plan is to create a detailed will. Your will should outline how you want your business assets to be distributed after your death. This includes any shares you may hold in the company, intellectual property, and any other assets that are critical to your business’s operations.
In our opinion, working with an attorney is essential to ensure that your will is legally binding and covers all your assets adequately. Your attorney can also help you create a plan for estate taxes, which can be complicated when it comes to a business’s assets.
Trust and Insurance
Trusts and insurance policies can also play a crucial role in your business succession plan. A trust can effectively transfer your business’s ownership to your chosen successor while avoiding probate court. This can provide a more seamless transition of ownership and help ensure that your successor can continue running the business without interruption.
On the other hand, insurance policies, such as life and disability insurance, can also provide financial protection for your business and your family in the event of your death or incapacity. These policies can help cover expenses related to your business’s operations and help ensure that your family is taken care of.
Other Critical Aspects of Succession Planning
While we feel the above steps are critical components of a business succession plan, there are other aspects to consider as well. For instance, it’s essential to have a plan for training and developing your successor. This can involve mentoring and leadership opportunities to help ensure they have the skills necessary to run your business successfully.
Additionally, keep in mind to have a plan for communicating your succession plan to your employees and stakeholders. This can help alleviate concerns and ensure a smooth transition of leadership.
Work with a Financial Advisor
It’s important to consult with a financial advisor who knows business succession planning to help you identify potential tax implications and provide guidance on ways to help reduce taxes and help preserve wealth for your family and your business.
At Cold Harbor Financial, our mission is to address not only retirement but every aspect of your financial life. Our team has been providing professional guidance and personal client service to individuals and institutions since 1990.
Contact us today to learn how we can help you create a business succession plan designed to meet your personal needs.
Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While familiar with the tax provisions of the issues presented herein, Raymond James Financial Advisors are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.
Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
