Variables to consider when creating a succession plan
Business owners in Connecticut and throughout the country can be so focused on growing their companies that they forget to plan for their exit. Those who own family businesses may also need to start planning for when and how it will be passed down to the next generation. If there is no successor within the immediate family, it could be necessary to look into selling to an outside person or entity.
The choice between handing the company to another family member and selling it could have a significant impact on a person's finances. It may also have an impact on the owner's estate plan. Instead of giving the business to a child or grandchild, a portion of the sale's proceeds would be left instead. In some cases, it may be a good idea to leave that money in a trust.
This can be especially true if the recipient of a lump sum of money isn't ready or able to handle the responsibility of managing their newfound wealth. Ideally, a business owner will spend time talking to family members about how they will manage their finances before exiting their company. If an individual wants to give to charity, doing so at the time of a sale could be an effective way to negate capital gains taxes incurred.
During the business formation process, it may be a good idea to consider what the exit strategy will be as well. This may help when it comes to writing the business plan and making other key decisions as the company grows and matures. An attorney may be able to provide advice and insight as to how a deal could be structured based on the needs of the owner. He or she may also review the terms of any proposed deal.