Toxic Gas Lawsuits against Environmental Protection Agency

Toxic Gas Lawsuits vs Environmental Protection Agency (EPA)

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How to guide to succession planning for successful estate planning and transitioning your business to your successors. Timelines, how to choose your successor and the transitional options available are discussed.

If you’re a business owner you should consider succession planning as part of your overall estate plan with your financial advisor. Succession planning is the process of handing over the responsibilities of running a business to someone else when you are no longer able, or willing, to run it. There are many steps to consider when planning who will inherit and run your business, and it is advised not to wait until you decide to retire to begin.

Step One of Succession Planning: Create a Timeline

One of the first steps you should take is putting together a timeline for when you would like to hand over the business. You should have a rough estimate of when you would like to start delegating authority to others that work for you, and when you would like the process to be complete so that you may retire at a reasonable age. This timeline will be a valuable gauge of how much opportunity you have to train your successor to run a successful company in your absence.
It is important to give as much time as possible train your successor so that the transition of authority is as smooth as possible when the time comes for you to leave. Depending on the size and type of business operation you run, you should consider three to five years as a minimum to accomplishing this goal. For this reason it may be wise to begin implementing your succession plan around age fifty-five or sooner depending on when you wish to leave the business to make sure you are still capable of teaching all the necessary skills to your successor.

Step Two: Choose an Appropriate Individual or Group of Individuals To Run Your Business

When you have your timeline in place, it becomes necessary to choose an appropriate individual or group of individuals to take control of your business. It is important to have more that one candidate in mind just in case your first choice decides to leave the business or does not wish to take over your position and responsibilities. Your successor should be someone with similar views to your own about the direction the company should take, have excellent managerial skills, and a proven track record for resolving conflict.
These traits are important to look for whether the successor you choose is from your family or a key employee you have come to rely on over the years. If you plan on leaving the business to more than one individual, such as multiple children, you should make clear ahead of time which responsibilities each person is in charge of. This will help to eliminate conflict later on when you are no longer around to serve as mediator for sibling rivalry.

Step Three: Transitioning the Ownership of Your Business

Now that you have your timeline and successor in order, you must consider the options of actually transitioning ownership of the business. The first step will be to consult with your financial advisor such as Estate Street Partners who will be familiar with the estate and gift tax laws particular to your state. It is important to review this information carefully so you do not leave your successor with unnecessary tax burdens which may put your hard earned business at financial risk.
The first step in determining your financial plan will be to obtain an accurate valuation of your business. You may need to hire a professional appraiser to determine the fair market value of your tangible and intangible assets in a manner that conforms to IRS standards and will prevent an audit of your estate once it passes out of your control.
Once you have determined the value of your business, you have several options on how you may transfer control to your successor:
  1. Gifting: This is an option that allows you to transfer ownership of your business over a set number of years without taxes, assuming you follow the current annual IRS gift limits. Gifting your business is also an excellent way to protect the financial security of your family and successors by removing the gifted amounts from your overall estate value. Staying within IRS limitations will help your family avoid gift and estate taxes which might otherwise cause them financial strain.
  2. Buy/Sell Agreements: These agreements are usually made between multiple shareholders in a company. A typical agreement might stipulate that if one shareholder decides to leave the company, the other shareholders are obligated to buy back his/her shares to keep the company from being sold to an outside party. Some agreements allow for all shares to be sold back to the business at fair market price, which means that employees other than the principals would have the opportunity to own part of the business.
Even if you do not have business partners, you should consider opening a business life insurance policy. If something were to tragically happen to you, a properly funded life insurance policy will provide your family and successors with the financial stability to continue business operations and pay off any necessary estate taxes. To protect the future of your business it is important to have an accurate valuation performed and to discuss changing tax laws with your financial advisor or Estate Street Partners on a regular basis.
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