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Virginia Beach Estate Planning Lawyer / Blog / Business Succession Planning / Planning For Passing On A Family Enterprise Needs To Start Early

Planning For Passing On A Family Enterprise Needs To Start Early

The owners of family businesses need to plan for in advance for the day when they will no longer be the owners.

English: Balderson's motors A family business ...
English: Balderson’s motors A family business. (Photo credit: Wikipedia)

It’s called having an “exit strategy,” and a recent article on Forbes.com focused on just how far out this planning should begin.

Try 10 years out.

“Each owner and business has unique needs and goals to take into consideration,” wrote contribute Steve Parrish, who offers advice on exit planning. “Regardless of each owner’s situation, let me offer a probable timeline and checklist for beginning the exit planning process. Now is really when the process should start, but this checklist will help narrow the scope a bit.

“To truly leverage the opportunities available to owners, exit planning should start years in advance.”

The purpose of starting to think about getting out a decade ahead of any plans to actually do so is to help save on taxes and settle matters of family succession.

“If the business is meant to be a family legacy, planning needs to begin well in advance,” Parrish wrote. “First, since there typically is not a liquidity event for the owner (e.g. a sale) the owner needs more time to generate other sources of retirement income. Second, if the children are succeeding to manage the business, they obviously need an adequate amount of time to develop appropriate management and leadership skills.

“The correct answer to, “When should I start exit planning?” is now,” he concluded. “Sometimes, we don’t get to exit on our own terms and things can happen unexpectedly. People become disabled; people die. Even if your business is in growth mode and you have no thoughts of retirement, you still need to deal with the contingencies of a forced exit. Peace of mind and security for you, your family and employees, these are all reasons to think about your exit plan well before you determine the date of your exit.”

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