Business Succession Strategies
July 9, 2021 | Lessons in Business Growth
It is frequently said that certain things in life are inevitable. Death and taxes are most cited but, for many lawyers in this area, business succession should certainly be added to the list. Despite the inevitability of it, planning for business succession never seems to make it to the top of many business owners’ to-do lists. While procrastination is common, starting the process early and building a good team to support you and your business is essential in seizing the right moment to sell or in planning for the unexpected.
Given the volatile political and economic climate, this is a particularly important time to be thinking about succession. The President and various Democratic members of Congress have proposed significant changes to income tax rates, capital gains tax rates, estate taxes, and estate planning structures which all impact available succession techniques. To avoid being caught on your heels by this kind of volatility, methodically working through a planning process is essential.
Identifying your exit goals is usually the first step. Will the sale of your business need to fund your retirement? Do you intend to use the business as a jumping point into a larger business endeavor? Even if you are just starting a business, thinking through where you are trying to get is a threshold question.
Identifying your target buyer/successor is typically the next step. Is it a competitor or another player in the same market? An internal employee or partner? A family member? Considering the identity of the buyer or recipient of the business has a significant bearing on whether you are looking to sell, gift, or do a combination of both. The transition process is never quick and is usually the result of in-depth, long-term planning. Set yourself up for success by starting early and starting with the big-picture items.