A succession plan is useful for retirement, sale or winding up a business. However, it is essential to have in case of the untimely death of a sole proprietor, a partner, or the owner of a corporation.
There are a number of benefits to develop a proper succession plan for a business, including:
1. Ensure the continuity of the business and its legacy;
2. Prevent or minimize conflict between family members, partners and/or employees; and
3. Significant cost savings for the company and the estate (leaving more for heirs).
Two significant ways that having a well-prepared business succession plan save money are (1) taking advantage of tax-minimizing strategies, and (2) avoiding the extra costs associated with navigating the process (and possible disputes) that arise from not having a proper plan in place.
A 2014 survey found that fewer than 20% of Canadian family businesses have a formal succession plan for who is going to run the company in the event of an untimely death.
Most people are familiar with Benjamin Franklin’s words “By failing to prepare, you are preparing to fail". When it comes to business succession (and success), a failure to prepare is preparing for significant costs and an administrative nightmare.
~ Shannon Mather