What To Know About Business Succession Planning In The Family

Why is it Important?

Business succession planning can be extremely impactful. The implications of succession— whether through a sale or a leadership change—can be profound. With proper planning, disruption can be minimized and value preserved, if not maximized.

Who is Your Successor?

Identifying your successor is a critical step when planning the future of your business. Your successor could be an existing employee with industry experience and knowledge of what it takes to maintain the company’s success. Alternatively, it could be someone outside the organization who is considering purchasing the business.

What About A Family Member?

If you are considering a family member to take over your role, it is important to ensure they are familiar with the company and comfortable assuming leadership responsibilities. Another key consideration is family dynamics. You may need to take steps to equalize the value of the business with other beneficiaries who will not inherit ownership.

How Do You Do It?

Passing a business to a family member can be done in several ways. One approach is through your estate plan, designating who will inherit ownership. Another option is gifting the business during your lifetime. However, you may prefer to receive monetary compensation, which could be structured as a sale. A sale may involve a full purchase requiring financing, or you may choose to retain partial ownership and create an agreement for your successor to buy a defined portion of the business at an agreed-upon price each year.

What if there are Multiple?

If you are considering passing the business to multiple family members, it is crucial to confirm that they share the same outlook and goals for the company’s future. Once there is alignment, ownership percentages can be determined. At that point, it is essential to draft the proper legal documents—such as an operating agreement, purchase agreement, and any financing documents that may apply.

Please reach out to Harding Financial Group with any questions. We are more
than happy to answer any questions you may have.

Harding Financial Group
614-515-4722
608 Office Parkway,
Suite A; Westerville, OH
43082-5900

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