Many New Jersey residents have invested a lot of time and wealth into their family business.
When they retire, for many reasons they may want to keep the business running. Perhaps they wish to hand responsibility for it down to the next generation.
Even if that is not the case, though, they still will likely want to be sure that their loved ones get some financial benefit from the business.
Without a good business succession plan, it can be tough to achieve goal once the existing leadership of small family business decides it is time to step aside. Many otherwise healthy businesses ultimately close because no one is available to take it over.
Sadly, in some cases, succession fights or other problems with a leadership transition damage or even financially destroy a business.
A business succession plan entails multiple components
A good business succession plan entails multiple components. Legally, a business owner in New Jersey should make sure his or her estate planning documents are in order.
This way, once one owner dies, he or she can die assured that the person or people of his or her choice have legal authority over the business.
It may of course be a good idea to get a head start on transitioning a business’s ownership, and, legally, this will involve buy-sell agreements and other contracts.
For tax purposes and other purposes, these documents are important even if a business owner has a clear successor in mind and all other stakeholders are in agreement with that choice.
There are also other important components to business succession planning. For example, a successor will need to have a thorough knowledge of all aspects of the business and plenty of opportunities to exercise leadership in applying that knowledge.
Communication about the plan with family members, other stakeholders including key employees and even the business’s customers and vendors is also important.
A person should develop his or her business succession well in advance of needing it.