Business Succession Planning: What You Need to Know
Attorney Michael Hynum discusses many important factors to consider before deciding how your business will continue without you. For your convenience, the transcription for the video is included below.
Business Succession Planning: What You Need to Know
“Hi, this is Mike Hynum with Hynum Law in Harrisburg, Pennsylvania. Today, I’d like to talk to you a little bit about business succession planning. You know, approximately 30% of family-owned business survive to the next generation. Which means that about 70% of the business don’t survive. So thinking about what you’re going to do, and how you’re going to pass along your business after you’re not longer involved is really something that is important to consider.
Consider All the Options
First of all, you have to think about a few things. Are you going to try to keep the business in the family, or are your going to try to pass it along to someone else that’s not related to you? Who’s going to manage the business? Because while someone in your family may still own the business, someone else may be in place to manage it.
Remember: There Are Taxes
Taxes. Keeping taxes down upon transfer. Most of the times, you develop a basis in the taxes or in the value of the property and its only taxed when you sell it. So you have to be careful to make sure that you keep the taxes in mind when you’re looking to do something with the sale of your business.
Remain Impartial
Also keeping things fair. If you’re going to pass it along to your family, you have to make sure that if you have more than one child, or more than one person in your family who’s going to be involved, that you don’t have some people feeling alienated and feeling like other people in the family are being given an unfair advantage.
Obtain A Business Evaluation
Once you decide how you’re going to handle all those things that we just discussed, then you have to look at valuation. There are many ways to evaluate a business, or get an evaluation on the business. A lot of times you’ll either need to hire someone who specializes in that, or your CPA firm might be able to assist.
Are you going to have to restructure the business? Is it going to continue on in its current form like an LLC, or a corporation, or a sole proprietorship? Or is the structure of the business going to have to change? Are there going to be new managers, new members, new owners?
Tax consequences and taxes are two different things that are really important to think about. What are the consequences going to be of the way that you handle the transfer of the business? And also making sure that you have enough on hand to pay the liabilities and obligations that you’re going to have.
What Comes Next For You?
Finally, are you going to retire? Are you going to just walk away and turn over the keys to somebody else? Or are you going to stay involved with the business for some period of time? All of these things are things that you really have to think about, and it would be best to sit down with a small business attorney that can help you formulate a plan when you’re ready to discuss the succession of your business.
It’s never too early to start, you never know when some tragedy could strike, you want to have a plan in place so that you know what’s going to happen to the assets that you work so hard to build. If you want to talk about this or any other issue, please don’t hesitate to contact me or call me at (717) 801-1105. Mike Hynum, Hynum Law, in Harrisburg, Pennsylvania. Thank you for watching.”