If your business is the biggest part of your estate, you know that you cannot afford any mistakes when passing it on to the next generation. This needs to go smoothly. It’s your legacy to your children. You also have to think about your employees and the future of the company. Everyone benefits when the transfer of a business is done smoothly and effectively.
So, what mistakes do people often make? Here are a few of the most common ones:
- Making your children feel like they have to compete for the business. This can lead to resentment, disputes and all sorts of problems. You do need to pick the best candidate for the job. If you have multiple children who want to be involved, find them different roles, rather than making them compete.
- Not starting soon enough. If you decide that this is the last year you want to own the company and you spend just a few months grooming your heir, it’s probably too late already. You ideally want to start years in advance so that they know how to run the company as well as you do by the time they take over.
- Picking someone who is not right for the job. This can be tricky; your heir who is interested in running the business may actually not be fit to do so. You have to be careful not to put someone in charge when they’re just going to ruin everything that you have built.
All aspects of estate planning are important, but succession planning is especially complex. Be sure you know what to do and where you stand.