When creating an estate plan, most assets are relatively straightforward to transfer. While you need to take care of how you pass them to avoid unnecessary taxes, the receiver does not need any special knowledge to receive what you leave.
If, however you own a business, things become more complex. Leaving your business to someone who lacks the knowledge to run it may mean that within a few months, it is worth far less than it was on the day you died.
Business succession planning is crucial, no matter how young your company. When you own a company, it is not only your family that you provide for. You indirectly provide for the families of all your workers too. They are all dependant on the business continuing to operate well.
Why should you have a succession plan in place from the beginning?
An effective estate plan considers that you could die, fall seriously ill or suffer a catastrophic injury tomorrow. On the personal side, you might give your spouse power of attorney so she can sign checks and make decisions about your healthcare. Succession planning for your business requires even more preparation. Here are some things to consider:
- Who can authorize things? Someone needs to be in charge if you cannot be. A company where no one has the power and legal authority to make decisions, sign paperwork and access money will not last long.
- Who has your knowledge? It is easy as an entrepreneur to hold a mass of information in your head. Yet, the more you share, the better prepared the company is for when you cannot be there.
You can adjust your business succession plan as you go along, just as you can and should update the rest of your estate plan over time. The important thing is to put a plan in place.