Roswell Business Succession Planning Attorneys Helping Local Entrepreneurs Ensure the Continuity of Their Businesses
Most entrepreneurs have purchased insurance to protect their business against several external threats, such as natural disasters and theft. However, many don’t realize that not having a plan which protects their business from being impacted at their leave may pose an even greater risk. Can your business survive if you became incapacitated or passed away? Who would be in charge, and how will they keep the lights on? These are vital questions that you need to address through the creation of a complete business succession plan.
Can a Business Succession Plan Ensure Management Stability for My Organization?
When you run a family business, your descendants or senior employees are the first people that come to your mind when you are thinking of who will take over when you are no longer able to manage the company. However, simply assuming that they are able and willing to take charge is a huge risk for your business. People and situation change, so even if someone was willing to take over before, he or she may be unwilling to when the time comes that’s why it’s important to not only have a succession plan but also to update it frequently.
Instead of taking a gamble and hoping someone will step up to the job, you need to make plans to prepare the next generation of leaders in your company. Even if your children or your best employee are willing to manage the business when you step down, they may not have the skills or authority to do so. A business without strong leadership doesn’t last long. For that reason, a key part of your succession plans entails identifying the next generation of leaders and mapping out the steps required to train them and prepare them to take over the company when the time comes. When done well, your succession plan can be an essential tool for ensuring management continuity.
Is There a Difference Between a Succession Plan and an Estate Plan?
Yes, there is a significant difference between succession planning and estate planning. For most small businesses, both plans work together and overlap in many aspects, but it is important to understand that these terms are not interchangeable. Estate planning addresses what will happen to your personal property and assets when you die and who will own them. Succession planning addresses vital issues related to who will manage your business in your absence.
For many small business owners, LLC stocks or interest are part of their personal property. If they are sole proprietors, any assets used for business purposes are also part of their estate. Through their estate plans, they can determine who will inherit the business and become the new owner. This is when a succession plan becomes essential, as it will address important issues related to who will manage the business and how and also allows the business owner to take the necessary steps to ensure that the company will be either properly managed or sold. In case the family decides it is best to sell the business, a succession plan can also include measures to protect the value of the business.
How Does the Tax Reform Act Affect Business Succession Planning?
An important consideration to include in your business succession plans is how taxes can affect the sale of your business. The recent changes brought on by the Tax Reform Act can greatly influence how you sell your business—whether in the form of an asset sale transaction or a stock sale. Planning ahead is key in determining the right steps.
For a business sold through an asset sale transaction, the buyer is now able to deduct 100% of the depreciation cost of qualified personal property acquired as business assets. The same applies to qualified improvement property. This results in immediate write-offs that can help reduce the overall tax burden for the newly acquired business.
What About Transferring the Business to My Heirs?
Besides determining how your business should be sold, you also need to consider the tax implications of keeping the business in your family and transferring it to the next generation. Your business can be transferred to your heirs while you are still living or after death. In both cases, you (or your estate) will be required to pay gift taxes, if the total value of the business exceeds the lifetime exemption of 11.58 million dollars. You can always contact our estate planning attorneys.
As you can see, setting up a proper business succession plan is fundamental to preserve the continuity of your business, protect its value, and safeguard your legacy. While it is a labor-intensive process, it should not be overlooked or postponed. If you own a family business and want to ensure it will continue to thrive after your exit, you need to begin planning today. Contact the legal team at Oren Ross & Associates today by calling (678) 250-4281 to get started with your business succession plans.