Illinois business owners like you should work on an estate plan. One of the key areas you need to address is business succession. After all, if you want your business to succeed far into the future, this plan is crucial.
There are several methods of picking a business successor. The one you go for depends on the benefits and drawbacks that you are personally invested in.
Passing your business on
Fit Small Business lists off five different ways that you can transfer business ownership. This includes transferring ownership to heirs, key employees or co-owners. It also includes selling back to the company or to an outside party.
If you want to appoint an heir, you have the benefit of knowing the successor well. This is also a tried and true way of preserving business through family lines. Many successful businesses carry on for generations in this way. But you may not always have a reliable heir in the family to pass things on to. Transfer can also get messy if multiple family members compete for ownership.
Selling your business
Selling to a company or outside party poses a different problem. You will have legal support. You will not have to worry about this party being able to afford buying your business. But you also have very little control over who buys the business. Do their principles fall in line with yours? Are they dedicated to the same cause? You have no way of knowing.
Selling to a co-owner or key employee takes this unknown factor out of the equation. You know this person will have a deep understanding of how your business works. But the buy-sell agreement does not always pan out.