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The benefits of a succession plan for your business

Even if you plan on running your Michigan company for years to come, it is important to have a succession plan in place. Having such a plan can make it easier for the business to survive if you should be forced to step down suddenly because of an injury, illness or another unexpected life event. A succession plan may also be helpful from an estate planning perspective.

What would happen if you couldn’t run the business anymore?

A succession plan ensures that a trusted employee would be able to run the company in your place at a moment’s notice. In fact, it could call for an automatic transfer of power in the event that you are incapacitated, die in an accident or are otherwise unfit to serve as the firm’s top executive. This can help to keep customer, employee and investor confidence steady in the face of an unexpected change in leadership.

How does succession planning make estate planning easier?

Succession planning gives you a clearer idea of who will inherit the company at some point in the future. It also gives you a clearer idea of when the transfer of power will take place and how it will be executed. Therefore, you can develop a strategy that allows the business to be transferred to another party in a timely and efficient manner.

For instance, if you know that the business is going to be sold to a key employee in 10 years, you could transfer ownership gradually over time in an effort to minimize the tax liability. If you are intending to gift the company to your kids, it might be best to put it in a trust to shield it from creditor claims or a divorce settlement. A business law attorney might provide more insight into how succession planning can make estate planning easier.

Ideally, a succession plan will be included as part of your business plan. However, an attorney may be able to help you draft one regardless of how long your company has been in existence.