Across the world, family businesses are the foundation on which economies are built.
Most family-owned businesses desire a successful continuity of their business from one generation to the next. Continuity and long-term planning are critical for achieving a legacy.
What is Succession Planning?
Succession planning is an ongoing process, which needs careful preparation for the smooth transition of ownership, leadership and management of the family business and family assets to the future successive generations.
A good continuity plan anticipates the challenges faced by the siblings, relatives, and large groups of business owners and shareholders. Structures are put in place to ensure strong leadership and effective decision-making for protecting family wealth and family relationships. Without a succession plan, the business may have high structural risk and family relationships could be at stake.
Benefits of Succession Planning
Succession planning is key to achieving a long-term legacy in a family business by, among other things deciding:
- when family members may work in the business
- how profits should be distributed
- who may serve on the Board
- how to plan for future leadership
- other matters such as taxes, liability, estate planning, ownership stakes, and voting rights.
If a family business leader suddenly wants to leave the business or unexpectedly becomes incapacitated or passes away, the business needs to have the ability to remain stable during such unpredictable times.
In today’s world, succession planning also involves identifying family members who might be unwilling to inherit the family business. Younger generations of business families today have exposure to the best of global education and are well-travelled individuals with their own interests. Hence, many aims to venture out on their own and may be reluctant to take over the reins of the family business, as was the practice in the olden days. Family-business owners need to identify such members and implement smooth exit strategies for them to avoid any succession planning-related complications.
To create a succession plan that works efficiently, you may identify a family office or law firm that has extensive experience in succession and estate planning and has a good understanding of how a business family functions.
To conclude, establishing clarity in the dispersal of wealth and key accountabilities is a wise act. As founders or directors of a family business, one must contemplate this at the right time and in a planned manner to keep ambiguity at bay.
To reap the benefits of hard-earned wealth, it is imperative to have a sound succession plan that aids in flourishing your legacy.
Please note that this article does not constitute express or implied legal advice, whether in whole or in part. If you require legal advice, please contact me at: firstname.lastname@example.org.