We all start businesses hoping that it will be successful enough where we can retire one day. Having a succession plan in place is key to reaching that goal. Every business should have a comprehensive succession plan.
A succession plan involves making a plan for the eventual change in ownership and management of your business. In creating a succession plan it is important to not only think about your personal goals for retirement, but also what your company will look like when you leave it. Below are three considerations for starting your succession plan.
What are your personal and business goals?
Do you want to sell your business to your employees? Maybe you want your business to remain in the family. Perhaps you would like to sell your company to someone you don't know. All these questions will determine how you proceed in creating your succession plan.
It is important to start working on your business succession plan years before your retirement date. Ideally you should start your succession plan at least five years before your planned retirement date. Starting early will give you optimal time to create a strategy to make sure your business is ready to be sold or transferred. Having a well thought out plan also makes your business more attractive to potential buyers.
Face your mortality!
Thinking about your own mortality is hard to face, but necessary in succession planning. If you are 100% owner of your business, it will be negatively affected if you become disabled or upon your death. Having a plan in place before it is needed is important to make sure that the value of your business will remain, even if you are unable to continue managing it.
Many people are unfamiliar with probate administration. Probate is the process used to validate a will once a person dies or to determine who are a the rightful heirs if a person dies without a will. I have prepared a simple infographic that explains the steps in probate administration.
Are you in need of help with probating the estate of a loved one? Contact Charlotte Key today to help get the process started by following this link.
I am often asked by small business owners whether a worker for the company should be classified as an independent contractor or as an employee. It is very important that business owners understand the difference between the two classifications and their responsibilities regarding each type of worker.
An independent contractor is a person that has a right to control or direct only the result of the work and not what will be done and how it will be done. He or she usually operates under a business name, has more than one client and maintains a separate business account. Independent contractors are considered self-employed and are responsible for paying self-employment taxes. Some common professions that are sometimes considered independent contractors are dentists, veterinarians, lawyers, accountants, contractors and subcontractors. If the services provided by the contractor are controlled by an employer (what is done and how it is done), most likely the person is not an independent contractor.
An employee is a person who performs services for your business and the business controls what will be done and how it is done. An employee often receives training for the job to be done and works for only one employer. A person may still be considered an employee even if the employer gives the employee the freedom to act, but retains the right to control the details of how services are performed. A business owner is required to withhold income taxes, withhold and pay Social Security and Medicare taxes, as well as pay unemployment tax on any wages paid to an employee.
The IRS will generally consider three categories to determine the degree of control and independence of a person: behavioral, financial and type of relationship.
If a business owner is still unsure as to whether a worker is an employee or an independent contractor, a Form SS-8 can be filed with the IRS to have a determination made within six months. For more information visit the IRS or the Small Business Administration. You may also sign up here for me to send you a free checklist.
Charlotte Key is an attorney that focuses on business law, estate planning and probate law.