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A Business Succession Plan (also known as Legacy Planning and
Continuity Plans) is a set of written agreements that detail what
happens when the business owner/owners leave the company, become
incapacitated, or die. It details corporate governance issues, how and
to whom the business ownership will transfer, management decisions, as
well as taking into account tax and estate planning consequences. It is
essentially an "estate plan" for a company. These are particularly
important for closely-held/family businesses, as failure to create such
a document can often lead to the businesses downfall.
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Benefits of a
Succession Plan
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Establish a formal policy
regarding family participation in the business
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Provide standards and plans to
assure that the "next generation" of management is capable and wiling to run
the business.
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Specifying successors, legacies or
appointment process
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Integrating the company business
plan into the owner's estate plan
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Developing plans for retiring
generations financial security
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Setting up an infrastructure
within the business to assist in the business's eventual succession or
transfer
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Reducing the businesses transfer
tax burdens, income tax consequences and business owners estate tax
consequences
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A properly drafter succession plan
will help a
business retain important employees,
limit its tax exposure, and maintain
the value of its stock/assets during
a management or ownership
transition. Succession plans are
valuable for allowing a business
owner to retain peace of mind that
their legacy/ life's work will
survive them. |
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