Planning to pass a business to the next generation, or to non-family members, involves a combination of complex issues requiring legal, tax, financial and management planning.Too often, a business owner devotes her entire career to building the enterprise, but fails to plan for the future of the business. When a thorough succession plan is in place, however, the business owner can anticipate and effectively manage change. The process must involve family members, professional advisors, shareholders, partners and key employees. A successful plan will address many issues, the more common of which are: the decision to pass the business to family, or sell the business to outsiders; the death, disability or retirement of the owner or co-owner; tax and estate planning; and the retention of key employees.
Succession planning is an exit strategy that transfers a business from the senior generation to the younger generation, to employees or to outsiders through the sale of the business. If the business will stay in the family, the owner may provide for the disposition of the business as part of his will. For example, an owner may stipulate the specific bequests of business interests; the transfer of his interest to a trust, such as a QTIP trust; the authority for fiduciaries to continue the business; or other arrangements.
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