A succession plan becomes necessary once a business owner wants to step down from their role or pass it on to your family’s next generation. It’s an insurance policy that allows you to let go of your current role while establishing continuity for your company even after you’re gone. Unlike last will and testaments, a succession plan can come into effect even when the person in question is still alive. All business owners need to consider drafting a succession plan, especially if they plan to keep the business alive for their hers to handle in years to come.
How to draft a succession plan
A succession plan provides various uses and advantages for business owners beyond letting go of ownership and management. It allows you to potentially map a progression track for your company’s direction, protecting its assets and ensuring its sustainability for future management. Additionally, it can minimise tax liabilities by keeping your books in order before you leave.
If you’re ready to plan for your business’s future, here’s a three-step guide in crafting a succession plan:
Step #1: Define and establish the future of current roles
It’s best to hire a legal adviser to review the company’s current infrastructure to identify each important role. This includes identifying who handles operational management or a more strategic governance role. These different positions can have varying impacts on the company’s sustainability. An outsider’s perspective will ensure that you will receive an objective analysis of how your company runs and how you should realign your retirement goals.
Step #2: Settle the best arrangement for current and future company leaders
After defining the key players in your company, it’s best to ensure that these stakeholders are involved in drafting your succession plan. It’s necessary to bring them into the discussion to prevent any conflict of interest once the plan comes into effect. Involving them in these decisions can give you another perspective on how to handle benefits and assets appropriately without surprising them of unaccounted-for clauses.
Once you’re ready to finalise your first draft, you need to make the necessary legal documents for review. This includes identifying voting rights, division of capital, allocation of company shares, and more. Keep in mind that these agreements need to undergo constant review and revisions if necessary. For example, the Enduring Power of Attorney should remain updated to account for all the listed beneficiaries and trust assets related to the company’s current executive board.
Step #3: Draft a coed of family business principles
Being ready to pass on your business to the next generation will require you to reaffirm or establish your company’s sustainability. This is vital to your establishment’s future, especially if you’re passing it on as an asset to your family members. You need to draft a Family Charter that records your company’s mission statement, together with the education requirements for future entry of family members in handling your company. It should detail everything from confidentiality obligations to ownership rulings. It can help to look for your company’s initial business plan and expound your company’s current infrastructure as a reference point for future owners.
Streamlined communication is necessary to ensure that your company’s future inheritors and stakeholders will be aware of the new management conditions. Ensure that you exercise transparency in telling key individuals about your succession plan’s contents to prevent any conflict of interest. Tying up these last few loose ends is the true test of being a business owner.
Going over all the legalities in creating a succession plan can be challenging without a legal professional’s help. At Springfield Legals, we provide our clients with a seamless experience in handling family-related business affairs. If you need a reliable wills and estate lawyer in Ipswich, contact us today!