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Here are the 5 most common types of small business succession plans in detail: If you founded your business with a partner, you may be considering your co-owner(s) as a potential successor.Many partnerships draft a mutual agreement that, in the event of one owner’s untimely death or disability, the remaining owner(s) will agree to purchase their business interest from their next of kin.
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This type of agreement can help ease the burden of an unexpected transition— for the business and family members alike.
A spouse might be interested in keeping their shares, but may not have the time investment or experience to help it blossom.
Generally speaking, you don’t want to grant ownership to family members who aren’t involved in the business.
Instead, many succession plans will include a buy-sell agreement work in the business, you typically still want to pick a single successor, as opposed to splitting ownership evenly between your heirs.
If a purchase is involved, the sale price and purchase terms are also clearly outlined, relieving some of the stress for the departing owner’s family.
In other words, a well-crafted succession plan aims to benefit everybody— the departing owner, their family, the business and the successor.
Business succession planning is a series of logistical and financial decisions about who will take over your business upon retirement, death or disability.
To write a succession plan, the first step is to identify the ideal successor to take over the business, then determine the best selling arrangement.