The San Antonio Business Journal’s recent article, “Plan your exit even if you never plan to leave your business,” explains that many owners think it’s okay to delay preparing for their business exit. Some think there’s no reason to plan for their exit whatsoever, because they’re willing to die in the business.
But owners should always have an exit plan prepared and ready. Things change, such as our health, the economy, and various legal planning opportunities. Therefore, be ready and consider these three key ways that business succession planning can help you and increase the value of your business—even if you don’t intend to leave.
Decrease your taxes
Whether you ultimately decide to sell your business, transfer ownership, or die working, you probably don’t want to pay more taxes than you have to. There are two ways business succession planning can help minimize taxes, even if you truly want to work until you die. For example, if your business value increases, your estate can benefit from a step-up in basis (if ownership of the business and the plan for its transfer after your death is properly set up in your estate plan). This saves your estate or beneficiaries from paying duplicate taxes based on the entire business value if it later sold.
The lifetime exclusion for gift and estate taxes (11.4 million as of the date of this writing) is now to the point where most small and mid-sized business owners don’t need to pay estate taxes, particularly if owners are married and have created an appropriate estate plan.
Protect your values
If you created a work culture that’s so unique and strong that it helps your company stand out in the marketplace, or your business gives back to the community, business succession planning lets you pursue and preserve your progress toward those important objectives. Exit planning strategies can foster the culture you’ve built, protect the employees who made the business a success, and help you build the legacy you want. Exit planning can help keep your chosen values front and center and protect its value, even without your presence.
Growing your business
Everyone wants their business to grow in value, but many business owners get to a point where they can’t grow the company any more by simply doing the same things they’ve been doing. However, business succession planning concentrates on building business value, whether you exit or not. These activities can help you increase your business’ growth potential, by emphasizing value drivers. Those are the aspects of your business that make it attractive to buyers. When it’s done the right way, installing value drivers can make your ownership even more fulfilling—concentrating on certain value drivers can let you focus on only your favorite tasks within the business and delegate your least favorite responsibilities to other qualified employees.
Use business succession planning to address concerns about the future of your business, family, and employees.
Reference: The San Antonio Business Journal (October 16, 2018) “Plan your exit even if you never plan to leave your business”