INTRODUCTION
Business Succession is the process wherein a plan is made and implemented to transfer a business from one generation to the next or from one owner to the next. Many business owners forget this important step in business. In fact, a recent survey revealed that 62% of distributors do not have a full and active succession plan in place. They are in danger of working all of their lives creating, building, and running a successful business only to have the business dissolved at their retirement or death. As such, a valuable asset is lost. Thousands or millions of dollars which could have been reinvested, saved, or enjoyed otherwise are lost in an instant. Furthermore, failure to implement a business succession plan can result in unnecessary estate taxes. This is why succession planning and implementation is important. Don’t let your lifetime of hard work end up being a garage sale.

PROCEDURE
The first thing to understand in business succession is that it will take time to implement. A number of steps must be completed in order to receive the maximum value for your business and make the transition as smooth as possible. Also, there are many factors to consider when creating a business succession plan. Your age, health, the industry, the economy, your children’s’ interests, and their ages are just a few factors. The first thing you will want to do is employ a professional who has experience to guide you through the planning process. After choosing a professional, the professional will want to perform a variety of functions to plan and implement your business succession program. The procedures include examining who the potential heirs or buyers are, valuing the company, creating the ideal scenario in which to sell your business or to pass it on, developing a strategy to deal with estate taxes if any, and establishing a retirement program.

To implement, the professional will start by looking at qualified successors. It is a good idea to have the successor work in the business prior to the transfer. The business can then be valued using a variety of methods. By using a variety of methods instead of one, the valuator can better justify the value of your business. In creating an ideal scenario to sell, the professional will review financial statements, look at the operation, etcetera and will then define economic parameters signifying when to sell. (By the way, right now is the best time to sell based on economic and tax considerations!) The professional will also make suggestions as to what you should do to maximize your business’ value. These recommendations will include things such as housekeeping details, restating financials, and the like. It is synonymous to adding curb appeal to a house in order to get a better sale price for it.

The professional will also look at estate taxes and set up a plan to deal with taxes. Trusts and gifting can be implemented to achieve lower estate taxes. Finally, retirement planning will be addressed by reviewing your retirement accounts, your business situation, etc. The professional will then make recommendations for your retirement plan.

CONCLUSION
The right time to start thinking about a succession plan is now. No one knows what tomorrow holds. Someday somebody else will be in charge of your business if a proper succession plan is implemented. Additionally, many factors have come together to create an ideal environment in which to sell or to pass your business along. These factors include a low capital gains rate, low interest rates, legal authority which lowers capital gains taxes on C corporations, lower estate taxes, and many other factors that make right now the optimal time to create a succession plan and implement it. The Center frequently engages in estate, business succession, and tax planning. If you have any questions or would like to create a business succession plan, call the professionals at The Center to begin the process.