Helping Clients With Succession Planning
Source: AICPA CPA Insider
The following includes excerpts, reproduced with permission, from an article by Heidi Bolger, CPA, ABV.
As trusted advisor CPAs, our unceasing responsibility is to look out for the best interests of our clients. When it comes to succession planning, we have all heard about or experienced the consequences of clients who did not have a plan in place and even as the years rolled by, continued to ignore the necessity to plan.
Unforeseen Exit
When should owners focus on planning for an unforeseen exit? At the time they become business owners, whether by starting a business or by acquiring ownership through a gift or sale. If there are other owners in the business willing to “buy” each other out at the time of an unforeseen exit (documented in a buy/sell agreement), the problem may be solved. For a sole owner, the plan becomes more complicated, with consideration to all of the following:
- Who needs to oversee a successful transition of the business?
- How would the owner(s) prefer to see the transition handled?
- What are the results/outcomes the owner would hope for as a result of the plan?
- When would the actual ownership transition(s) occur?
Planned Exit
Arranging a graceful, fruitful exit for an owner who has a sincere desire to turn over his or her business and get on with life is the best case scenario. The question of when this planning should take place is often more emotionally, than logically driven.
As CPAs, we recognize that the sooner a succession plan is developed, the more options there are. However, engaging your clients in succession planning before they are ready can turn into a failed attempt and negatively impact their willingness to invest time in future planning. My advice is to invite clients to begin the succession planning process in their 40s, but understand that they may not be ready for it emotionally until they reach their 50s, and some may even hold out until their 60s or 70s.
[Editor's note: The article goes on to discuss the challenges of determining when and how to relinquish stock ownership.]
For the complete article, read “Is There an Ideal Time to Create a Succession Plan and Transition Ownership?”
From AICPA CPA Insider, September 6, 2011, http://www.CPA2biz.com.