If you own a family business, retirement isn’t simply a matter of deciding not to go into the office anymore. You’ve got some critical questions to answer like…
“What happens to the business when you’re no longer running it?” and “Will you have enough money to retire?”
The family dynamic complicates the whole transition because of the relationships and emotions involved. Most people are not comfortable discussing topics such as aging, death, and financial affairs.
Comfortable or not, succession planning should be a priority for any family business considering that more than seven out of ten family-owned businesses fail to survive the transition from founder to second generation, typically falling prey either to estate taxes or family discord – or both.
Developing and implementing a well-designed succession plan is essential to the survival of a family business from one generation to the next.
Interested in seeing that your business becomes a lasting legacy? It certainly won’t happen out of the blues. While you might have steered the business on the right path for as long as you can remember, you have to make arrangements for the survival of the enterprise after your departure.
While most people are desirous of a long life to take care of their loved ones and assets, death remains inevitable. This makes it important to have a succession plan for your business. Such an arrangement will guarantee the absence of conflict and struggles while assuring the continuity of the business on the right footing. Many business owners are unwilling to broach the topic of succession due to its web of complexities.
Emotions usually run deep when one person from a family of more is singled out to learn the ropes in readiness for ascending the ‘Iron throne’. This alone is enough reason to have business owners delay discussions related to the subject matter. But succession planning should never be delayed. It is one topic that should be discussed in the open.
The lack of a proper succession plan has seen the downfall of many family-owned businesses. The culprit could be anything from unpaid taxes or violent family dispute to mismanagement of resources.
If you want your business going stronger from generation to generation, you should take succession planning seriously. No firm handles succession planning as efficiently as SmartCPA does. Below are some of the grey areas where we could be of help:
We help you with these key issues
- Keeping it in the family. Are you going to pass the business on to your family or sell it to a third party? We help you weigh the advantages and disadvantages of each of these options.
- Who’s going to run the business when you’re gone? Management and ownership are not one and the same. You may decide to transfer management of your business to just one of your children but transfer equal shares of business ownership to all your children, whether they’re actively involved in the business or not.
- Minimizing the tax bite. The tax burden when transitioning a family business can be significant. The challenge is that a family business is not generally a liquid asset, but taxes are typically due when ownership is transferred.
- Making it fair. Transferring family ownership often adds a tremendous amount of stress to individual family members. We talk with each of the family members to ensure that they feel they a getting an equitable and fair share of the pie.
What we do for you…
Once we understand how you feel about the key issues above, we begin constructing your succession plan focusing on these 5 issues…
- Business Valuation
- Business Restructuring
- Tax Consequences
- Retirement Projections
- Tax Projections
- Business Valuation
- Business Restructuring
- Tax Consequences
- Retirement Projections
- Tax Projections
Before a succession plan is put together, the economic value of the business has to be assessed.
The art of business valuation isn’t something you’d establish with the snap of your fingers. It takes the expertise of professional business evaluators to attach figures to something close to being abstract.
At SmartCPA, we have efficient business evaluators in our employ who understand the importance of the process, and they are devoted to ensuring the accuracy of the business valuation. The process of business valuation has evolved over time. To ensure the accuracy of the results obtained, every aspect of a business is considered during a valuation.
Business evaluators would usually consider the capital structure of the enterprise, the value of its assets, and the potential of the business in the nearest future.
However, the parameters used to arrive at a valuation would depend on the industry, the enterprise concerned and the experts involved.
A succession plan can’t proceed if the possibility of a business restructuring is not scrutinized. While this phase isn’t as crucial as the valuation phase, it helps in resolving certain grey areas especially as it concerns its finances.
If the debt profile of the business has risen to a worrisome state which could jeopardize a succession plan, a restructuring of the operations and structure of the enterprise could help set it on the right path.
By having a business restructuring carried out on your enterprise, you avoid the chances of passing down an ailing company to your heirs.
For a successful restructuring process, financial advisors and legal experts are hired to brainstorm on the most effective route to take. Depending on those hired to find a solution, the restructuring may be fatal or a resounding success.
By having SmartCPA oversee your succession plan, you are confident of a successful business restructuring without any unwarranted layoffs or job overlap.
Buying, selling or transferring the ownership of a business comes with substantial tax consequences.
This makes a case for taking the tax consequences of a succession plan into consideration before proceeding.
Transferring some company stocks in your name to your niece or nephew isn’t exactly a smart move despite its empathetic niceties. Doing such will have the IRS take a nice chunk of money as the estate tax.
With a succession plan, you can set up a trust with your family members as beneficiaries. However, this will depend on the business and your desires on how the business will be managed.
You can’t possibly manage your business till infinity.
You can’t possibly manage your business indefinitely, as such, succession planning is required. A succession plan is meaningless if it does not include a retirement planning. Having a retirement timeline ensures you have a clear picture of when you intend throwing in the towel.
It makes the transition period even more streamlined. There’s the added benefit of having more time on your hands and making sure your successor(s) follow the right path even when you’re not available anymore.
SmartCPA goes beyond assisting you to put together a succession plan but also, plan your retirement according to your wishes.
If you don’t make the right tax succession planning you might encounter catastrophic consequences. You could either suffer costly tax liabilities or be running a charity with the government as beneficiaries.
The importance of a tax projection to a succession plan can never be overemphasized.
Planning for the perpetuation of your business beyond your existence means tax-related issues are not taken lightly.
By having the tax experts at SmartCPA oversee this aspect of a succession plan, you can rest assured of a hitch-free transition.
Let us help you pass on what’s taken a lifetime to build by calling us at (855) 500-9797