Small Business Succession Planning

Getting ready for succession

‘Boards of directors want a top-notch general counsel who will be their trusted business advisor,’ says Cary McMillan, chief executive officer of True Partners Consulting, a global tax and business advisory firm. ‘But that takes work on the company’s part, as attorneys are in the minority at most corporations.’ This is what makes it particularly difficult to fill the corporate secretary position . Companies are looking for specialized talent and experience – and in large doses. Furthermore, the long careers of some corporate secretaries result in substantial amounts of accumulated legal and company knowledge, which ultimately makes replacement (and succession) a greater challenge. ‘Those who do become corporate secretaries tend to do so in their mid to late thirties,’ notes John McGuire, a partner focusing on corporate law matters at Ohio-based law firm Calfee Halter & Griswold. ‘They often retire from the position along with their early retirement from main employment – say, late fifties or early sixties.’ ‘I believe that succession planning for senior positions in any organization plays a vital role in achieving consistent, long-term success,’ says Fred Krebs, president of the Association of Corporate Counsel. ‘Succession planning requires careful thought and deliberation about what the organization needs and how to fulfill those needs.’

McGuire, who specializes in succession planning, agrees with this sentiment, strongly believing that a comprehensive plan of action should be in place by the time a corporate secretary is ready to leave the firm. ‘Succession remains a critical issue at any firm,’ McGuire explains. ‘The folks remaining behind need to know what is expected of them. Things can change abruptly, and you need to be prepared.’ Adding to the problem is the uncertainty that many firms face when it comes to succession planning – as evidenced by the mushrooming collections of analyses on this issue. ‘The findings point to a looming management succession crisis among North American companies,’ says Sandi Edwards, senior vice president of AMA Corporate Learning Solutions, which offers advisory services and tailored learning programs to organizations.

SMALL BUSINESS / SUCCESSION PLANNING - Florida Estate Planning

According to most tax experts, now is a fantastic time to give shares of a business to family members. As you may well know (if you follow this blog) 2011 and 2012 are have unique in terms of estate and gift tax planning. As one tax attorney was quoted in a recent New York Times article , “We are in the prime transfer tax situation.”

However, having said that, there’s an old saying about not letting the tax tail wag the dog. While now may be the prime opportunity, tax-wise, to give away share of the family business to the next generation – a bigger question is whether you should give away the family business at all. While it may seem like both a loving gesture and a way to ensure the longevity of the enterprise, gifting can be the worst possible option for both the business and the family that owns it.

Tom Deans, author of Every Family’s Business , is a critic of what he calls “the longevity myth” that surrounds family-owned businesses. He says that giving away a business is both corrosive and dangerous. His advice? Your family business ought to be sold – whether to the next generation or to an outside buyer.