In today’s corporate environment there has been an increased demand for Business Succession by companies in a bid to guarantee available and proficient replacement of key roles. With the wide gap of talent between senior employees and junior employees, companies have resolved to take succession plans seriously so as to secure future key replacements.
Organizations and company owners however find themselves too absorbed in their work that they lack the time to plan for the future of their companies. With various findings about succession planning, research has found out that very few companies have a formal written plan of succession while most of them lack this critical plan. Companies now need to revise their future projections strategies and place as mandatory the inclusion of Business Succession.
In order to achieve the expectations of the organization or business owner with succession plans, legal advice from a professional business succession advisor has to be sought after. Hiring one may pause as a waste of money but apart from legal advice, a succession advisor also gives advice on strategy.
Here are some of the strategies business owners can expect to hear:
Valuation of business: It is an important strategy for business owners or organizations who may assume that they know their worth in the market only to realize the buyer has a different valuation. A valuation of the company from a certified source is the best option as it acts as insurance in case of conflicts in the sale or transfer of ownership.
Family succession: Ideal for family businesses, this strategy is designed to transfer the family business from its initial owners to the next generation without incurring any taxation or with minimal taxation. One of the popular tools used is trusts where a trust is formulated by the initial owner and uses some assets of the estate to fund the trust thus reducing its taxation cost while still providing income to the initial owner.
Buy- Sell Agreements: It is as useful as it is flexible for organizations that use it. It is legally binding between shareholders and the company that is willing to buy stocks of the majority shareholder. An agreement is recorded in writing of the buy sell agreement’s restriction to the stock value.
Gifting of Shares: This strategy allows for family business owners to take advantage of the annual stock value gift exclusion. As it is tax free initial owners can hand it over to their next beneficiaries each year until the gift amounts to the limit of annual exclusion.
However, it is recommended as suggested above that legal advice should be consulted so as to implement on these strategies as required by the law. With countries like Japan which has challenges of a low young population; families have to make effort to get advice about inheritance and business transitions even to non- member stakeholders. The Business Succession Nagoya law firm offices as well as the Business Succession Tokyo law firm are making head way in solving some of Japan’s Business Succession challenges including: management structure after succession, payment of inheritance tax among others.