Succession Planning

Succession Planning

You’ve built your business through a lot of hard work and maybe a little luck. In the end, you’ve constructed something of value, both to your family and your community. According to Forbes Magazine, family businesses make up as much as 50 percent of America’s gross domestic product. In fact, family businesses account for more than a third of the Fortune 500 roster. About 30 percent of these companies have existed for multiple generations. To get there takes foresight and careful succession planning in NYC.

Succession planning involves maintaining a successful business while developing the leadership abilities of the next generation. Miller & Company LLP, NY Certified Public Accountants, a best rated NYC CPA firm.

As you near the retirement you’ve planned, you realize you want your legacy business to continue — not in strangers’ hands, but in your family’s. That’s the essence of NYC business succession planning, but it’s easier to say than do. Your family dynamic may complicate any transition succession planning you attempt because of the relationships and emotions involved.

Dealing with Family Conflicts

You know your family better than anyone, and may be able to predict disagreements as you work out your succession plans. Expect the problems that arise to stem from personality conflicts, hurt feelings and jealousy. To make the transition work, however, you have to pick your successor from within your family. Challenges can include:

• Getting the family on the same page
• Balancing the benefits throughout the family
• Setting up rules everyone can live with
• Grooming suitable heirs

It’s ironic, since the success you enjoy today was built upon and defined by the relationships you made. The quality of your business relationships influences the quality of your company. Now if you can only influence the quality of your familial relationships.

No matter how involved your family’s been in your business, succession planning requires a sure hand and clear goals, as more than seven out of ten family-owned businesses fail to survive the transition from the founder to the second generation. To make that transition, call on business succession planning consultants who have your interests in mind while they enable your business to succeed.

Key Issues in Succession Planning

To ease your transition anxiety, the business experts at Miller & Company located in NYC and Queens recommend taking the following recommendations:

• Keep it in the family. Decide the real reasons you want to pass the reins on to your family. If you determine it’s worth the effort or you would rather let it die than sell it to a third party, you can get professional guidance to help you make the transition.
• Pick your successor. Management and ownership aren’t the same things. You may decide to transfer management of your business to one of your children, but transfer equal shares of business ownership to all your children, whether they’re actively involved in the business or not. That can help mitigate hard feelings of jealousy.
• Minimize the tax bite. The tax burden when transitioning a family business can be significant. Since taxes are typically due when you transfer ownership, you need to figure out how to make it work. Look for guidance and advice from tax professionals.
• Make it fair. Transferring family ownership often adds a tremendous amount of stress to your family dynamic. You need to talk with each of your family members to make sure they feel they’re getting an equitable and fair share of the business pie.

Steps to Transition Your Family Business

Developing and implementing a well-designed succession plan are only ways to encourage the survival of your family business from one generation to the next. You can never guarantee its success, but that’s part of letting go of the reins and trusting your successors. For each of the following steps, you can get professional assistance from Miller & Company — and you may need it:

1. Establish your objective. Don’t start the transition until you have clear goals in mind. Work with a business consultant to develop your vision. Identify your financial needs in retirement and the business cash flow management. Collaborate with your family to set business goals for the next generation.
2. Decide on a process. Put your vision into a written document. Tell your family your plans. Figure out who will be the decision-maker, especially if multiple family members are going to be involved. Determine a conflict resolution plan.
3. Develop the succession plan. Pick your successor and get buy-in from your family. Give a role to everyone, even if they are more passive. Give everyone a stake in the company’s success.
4. Create a business plan. With professional help, if needed, figure out how to minimize the tax burden. Write everything down: the business plan, the transfer papers and contingency plans. Everything. Review them with consultants and lawyers.
5. Design a transition plan. Decide how to make the actual transfer: a sale, a gift or something in between. Contract the financing, if necessary. Set the timeline for the transfer. Work out the details. Make sure everyone’s satisfied.

Get the Help You Need When You Need It

At any stage along the way — from initial idea to final contract — you can hire a business expert to offer advice and to review your documentation. Depending on the size of your family business, you may need to involve accountants, lawyers, tax experts, business specialists and even real estate professionals. If your goal is a successful transition of ownership and management, don’t hesitate to get the help you need when you need it.

Best NY CPA, Miller & Company of NYC, you’ll find big-picture New York accountants who look to protect your interests at every turn. Once they understand your vision, they can begin business succession planning that incorporates your needs. In particular, your personal NYC CPA focuses on five key issues you’ll encounter during your transition succession planning:

1. Small business valuation. Before you sell or gift your business, you need to determine its worth.
2. Business restructuring. During this process, your business may need to change from a sole proprietorship to an S corporation, for example.
3. Tax consequences. The transfer of ownership of any business carries tax consequences. Make sure you understand not only what you need, but how to minimize the consequences.
4. Retirement projections. As you transition from business owner to retirement, you have to make sure your financial needs are taken care of.
5. Tax projections. For both you and the business you’re leaving behind, you should be able to predict the new tax burden so you can prepare for it.

Do you have questions about services we offer including Succession Planning in NYC and Long Island? Would you like to receive a personal Succession Planning consultation customized to your specific needs? To schedule an appointment with a nationally recognized, best NY CPA, Paul Miller of Miller & Company LLP, please contact our Long Island or NYC tax accountants for a FREE CPA consultation.