This article was originally posted on EstatePlanning.com
“If you own and operate a business, you need to have a plan for the future of the business in the event you become unwilling or unable to manage it yourself. If you are like the many entrepreneurs who would like to pass the family business down to your children or grandchildren, it is important to create a plan now to ensure a successful transition.
If possible, begin business succession planning at least five years in advance of your anticipated exit. Even better, integrate your exit strategy into your business plan. Having a clear and integrated plan will give the transition process the best chance of success. When creating your business succession plan, keep your family members involved in the conversation so that they are not blindsided after your death.
One of the most important decisions to make will be who is be next in line to run the business. It is important to be realistic about this decision, and select the child who is best qualified for the job. If you have multiple children, realize that the idea of each child getting an equal share of the business is often not in the best interests of the future of your business. Consider transferring the entire business to the child who you would like to follow you as the owner, and bequest other assets to your other children.
Once you have selected your successor, take the time necessary to train and work with him or her. Nearly 70 percent of family businesses fail after being taken over by a child.This is largely because the child was not prepared to run the business. Consider having your child work directly with you for at least a year before you anticipate transferring the business.”