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What should you know about succession planning?

| Mar 30, 2021 | Business Law |

When building your business, it is important to have all of the crucial pieces in place early on. This includes having plans for tackling disputes, having emergency plans, and even knowing what you want to do at the end of your run.

This is where business succession planning comes in. After all, you do not want to get left in the lurch with no plan if something unexpected happens.

Passing it down the family line

The Small Business Administration goes over what you need to know about succession planning. There are many options for you when it comes to picking a potential succession plan. For some, it is an easy matter because you run a family business. Instead of dealing with buying or selling, you simply pass the business down to the next of kin. Note that you may run into gift taxes in this case, though.

Selling options

Of course, selling is always an option. You can choose to sell to a familiar figure, such as a key employee or a co-owner. You can also sell your share back to the company. But note that these figures may not always have an interest in taking on control of the company at large. On the plus side, you know them well enough to understand how they will run the business in your stead.

You can also sell to an unrelated party. The main benefit is knowing that they have an interest in running the business and likely the funds to back it up. On the down side, you do not know them as people and cannot predict how they will run things. These are just a few of the pros and cons to consider before making your choice.