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3 essential things to remember before succession planning

On Behalf of | Feb 7, 2024 | Business

Building a business is a significant achievement. Naturally, as the owner, you would want to secure its future through careful business succession planning. This process requires careful thought and preparation. Failing to do so could risk the future stability of your business.

Here are three key considerations to keep in mind before you start.

Start the planning process early

Consider starting the planning process early. It’s never too soon to start planning for your business’s future. The sooner you begin, the more time you have to explore various succession options. This allows you to make the most informed decision possible.

Plus, in case of illness or retirement, you’re not caught off guard or left scrambling to put a plan in place since you already have one.

Select the right successor

Choosing the right person to inherit your business is a crucial decision. It can seem overwhelming due to potential changes in your business’s direction. But remember, this is one of the most critical steps in continuing your business. This individual will be responsible for leading your hard-earned business. So, you must choose someone who aligns with your business vision.

Potential successors could include a family member, a business partner, or even someone outside the company. Take your time with this decision, as it will greatly impact your business.

Understand legal and tax consequences

California’s state laws concerning taxes, corporations and estates can influence your business succession plan. For example, the California Revenue and Taxation Code may affect your business’s valuation during the succession. Also, the California Corporations Code can dictate procedures for transferring ownership. This applies if you own a corporation. Navigating these laws can be complex, especially for large-scale businesses.

To effectively manage these complexities, consider consulting with an attorney. They can help secure your business’s future. Also, they can assist with ensuring your business succession plan’s legal compliance.