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David P. McCabe,
WMCP®, ChFC®, CLU®
Financial Planner
Nathaniel D. High, RICP®
Financial Planner
Nicholas J. Over, CFP®
Financial Planner
Sara E. Martin
Client Relations Manager
Jennifer A. McCabe
Client Relations Specialist
jennifer.mccabe@prudential.com
Centuria Financial Group
2333 Baltimore Blvd Suite B
Finksburg, MD 21048
Phone: 443-952-7232
November/December 2024
Your Business Needs a Succession Plan
Running a small business is not for everyone, but younger family members often want the challenge of taking over when founding generations retire. If you're part of a family business, here's how you can work toward continuing the business from one generation to the next, even in times of uncertainty like these.
Start with a Plan
Like everything else in business, you'll prepare best by creating and following a plan. A succession plan lists what events – death, disability or retirement – will trigger the next generation of leaders. It should also determine a valuation method – usually from a qualified valuation professional or certified public accountant – to determine the company's fair value.Next, communicate frequently with your successors. You may have differences over how to run the business, and you'll need to resolve them—you can't run the business forever. You will want to create a development plan allowing family successor(s) to gain the necessary experience to run your concern. And you may want to begin making shared business decisions that allow your loved ones to get hands-on experience running the company.
Money Matters
While family members are learning all the tricks of your trade, create a buy-sell arrangement that works for everyone. Using the earlier valuation, detail how the next generation will buy into the business. Also, figure out appropriate compensation to leave a loved one who doesn't participate in the business to equalize your estate.Your sale price and schedule of payments may be included in your buy-sell arrangement, and you'll also address tax responsibilities, the value of business assets, and total liabilities. You may also want to address potential liquidity issues to avoid future problems for both the seller and buyers. Pre-paying the transfer, whether through gradual ownership shares while working together, contributing to a sinking fund, or purchasing life insurance, might help address any liquidity issues.
Begin working toward an agreement as soon as you and your loved ones decide family succession is in everyone's interests, and review your succession plan regularly because change happens. Most importantly, work with qualified legal, tax, and financial professionals to develop a plan that benefits you, your family, and your business.
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Centuria Financial Group is not affiliated with Prudential Financial. Centuria Financial Group sells insurance products of Prudential Financial's affiliated insurance companies in addition to products of non-affiliated insurance companies. Centuria Financial Group is authorized to sell and service certain insurance products of Prudential Financial companies as well as use this material. Centuria Financial Group and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Offering financial planning and investment advisory services and programs through Pruco Securities, LLC (Pruco), under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies. 1-800-778-2255. Sara E. Martin and Jennifer McCabe are employed by David McCabe and not The Prudential Insurance Company of America or its subsidiaries.
This newsletter is general educational information provided by a Prudential Financial Professional and is not intended to market or sell any specific products and services, but rather provide general information about the subject matter covered only.
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