Succession Planning Process
The first step in the planning process is providing financial security for an owner and their families. The process begins with a thorough understanding of an owner’s goals for retirement, continuing business success, and family involvement. Owners tell us they don’t want to retire; however, they do want options to offload some of the responsibilities of day-to-day management. Providing financial security begins with a solid financial plan, which includes managing risks, eliminating personal debt, and establishing an investment portfolio. The entire process is designed to gain peace of mind and maintain the lifestyle an owner desires.
The second step in the planning process is designing a smooth and effective ownership transition. Mitigating risk and protecting an owner’s estate is paramount in the process. Owners want an ownership strategy that doesn’t create unnecessary risk and allows a new owner to gain equity. An effective transition will protect assets, mitigate taxes, and minimize risk. The process may involve financing options, entity restructure, and buy-sell agreements. This step is designed to efficiently manage the ownership transition to address the needs of the owner, wants of the family, and the demands of the operation.
The third step in the planning process is establishing a leadership structure that allows new and existing owners to manage the operation through the transition. Most owners want a well-prepared next generation to take an active role in the operation. They want to gradually cede responsibility and mentor the next generation into a leadership position. Succession is easier with well-defined roles and responsibilities. This phase will focus on establishing a structure that ensures management decisions are made only by active and involved owners. It will safeguard the operation from the intentions of family members who are inactive and not dependent on the operation.
The fourth step in the planning process is minimizing exposure to the estate tax, mitigating transfer costs, and providing lasting security for the family. As a rule, owners want to leave their loved ones secure and know their business will continue. They want to mitigate costs and minimize taxes. They want to benefit the family and worthy causes. Estate planning strategies are complex and confusing. They involve legal terms, financial concepts, and tax terminology. This step in the process will provide equitable distributions for their children and financial security for their loved ones. Estate tax provisions will ensure an owner’s wishes are achieved.