Some business owners begin succession planning with the idea that they are going to make the plan equal. For instance, a business owner may have four children who have now grown into adulthood. Their plan is to give each person 25% ownership in the company, and they will then have to work together to make important decisions and guide the company moving forward.
While it is certainly possible to make an equal business succession plan, it is not mandatory or even necessary. In some cases, it may be better to focus on making things fair to your beneficiaries, and you also want to consider what will be best for the future of the business. This may mean that an unequal split makes more sense.
Is anyone currently working at the business?
For an example of how fairness may be a better gauge than equality, consider a business owner who has four children, but only one of them is already working at the company. That person has put years or even decades into learning how the business operates and gaining skills and abilities on the job. The other three adult children are all working, but they have their own careers and interests.
In a situation like that, it may be fairer to leave the business to the single beneficiary who is already working there and has demonstrated an interest in taking over as the next owner. This could also be better for the company because that person understands their role and how to make the company profitable moving forward. Bringing on the other siblings and giving them all equal rights could just lead to significant conflicts and disagreements.
These are just a few things to keep in mind when making a business succession plan. Be sure you also know what legal steps you’ll need to take.