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The Importance of Small Business Legacy Planning
Legacy planning, also known as succession planning, is a crucial process that every small business should take to heart. According to the U.S. Small Business Administration, small businesses constitute 99.9% of all businesses in the United States1. However, it is astonishing to note that the Exit Planning Institute reports a mere 28% of small businesses have a transition strategy in place2. This statistic demonstrates an evident gap and urgent need for robust small business legacy planning.
Understanding Small Business Legacy Planning
Legacy planning is not merely an exit strategy, but a comprehensive approach to ensure longevity for your small business. Essentially, it’s a blueprint your business can follow in times of planned or unplanned succession, providing a roadmap for the continuation of your company’s vision, mission, and business values.
Legacy planning includes detailing how your small business should respond in situations such as the retirement of the owner, an unexpected death or disability. It also details transfer of ownership, liquidation plan and tax implications, ensuring that the company continues to serve clients and employees while maintaining its competitive edge3.
Why Small Business Legacy Planning Matters
Undertaking legacy planning for a small business has long-reaching effects. It can be the difference between the survival and closure of your company. Here are some key implications:
• Certainty in Uncertainty: Legacy planning provides the roadmap on how to react to sudden changes in management or ownership, reducing uncertainty and panic.
• Continuity: An established succession plan ensures that the business continues to run smoothly, even in the event of a sudden leadership vacuum.
• Value Preservation: A well-structured legacy plan helps to protect and potentially enhance the value of the business for the next generation.
• Reduction in Tax Liability: Tax management in legacy planning helps to negate any potentially massive inadvertent tax bills4.
Legacy Planning from DeFreitas & Minsky LLP’s Perspective
At DeFreitas & Minsky LLP, a New York certified public accountant with extensive experience in small business consultation and management, small business legacy planning is given paramount importance.
We believe in a proactive, strategic approach to succession planning. Our custom business advisory service focuses on your unique business needs and goals, empowering your small business to traverse any unplanned disruptions with minimal to zero consequences.
Essential Steps in Small Business Legacy Planning
Based on our broad diet of experiences with small businesses, we have identified some essential steps that form the backbone of effective small business legacy planning:
• Identifying and Preparing Successors: It involves identifying a suitable successor and providing the requisite training and mentorship to ensure a seamless transition.
• Business Valuation: Determine the value of your business. It’s crucial for setting expectations and negotiating transfer viability and methods.
• Legal and Financial Planning: Enlist professional help for planning the legalities around the transfer of ownership, and ensure minimal tax liability.
• Implement the Plan: It’s one thing to plan, and another to act on it. Implement the plan using a holistic task checklist and regular reviews.
Embrace Change – The Essence of Legacy Planning
As Charles Darwin rightly said, “It is not the strongest or the most intelligent who will survive, but those who can best manage change.” Embracing change is the core essence of small business legacy planning.
Legacy planning for small businesses isn’t a choice, but a strategic decision, and in many situations, it could be a survival factor. DeFreitas & Minsky LLP stands by your side, providing expert guidance and tools to help structure a resilient legacy plan for your small business, ensuring that your vision and mission continues to thrive.
For more information on our small business legacy planning service, visit our website or get in touch with one of our experts today! It’s never too early to start, and the right time could be now!
