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Do small businesses really need a succession plan?

On Behalf of | Jan 12, 2023 | Business Law

Owning a small business is a lot of work and a huge commitment. Those who decide to take on this role often work harder than large corporations.

Due to the time and effort put into making a small business successful, most owners want to ensure their business can be passed on to their children or future generations without issues.

Are succession plans necessary?

There is no minimum size for a business to have a succession plan. Many experts agree that all businesses of all sizes need this in place. Creating a succession plan takes time and effort, but it is time well spent for most.

Business owners must create a succession plan. This includes the existing owner updating their estate plan and determining how the business will be transferred after they die.

For example, some business owners may want to have the business sold or have it transferred to an employee, while others want to pass it on to family members.

Choosing the right successor matters

Choosing a business successor is an important decision. Finding someone with the same desire and passion for the business as the existing owner is imperative. It is never wise to select someone without discussing the plans ahead of time.

The current business owner and the successor need to have the same core values and principles to ensure the business will continue to grow and succeed. While this is true, choosing someone with the same vision for the business’s future is unnecessary. Sometimes, trying to impose future plans on a successor can create friction.

Creating a legally binding succession plan

Transferring a business to a successor needs to be done properly. Knowing the legal process for this will ensure there are no issues.  

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