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Succession-Planning: Separate Ownership & Management

March 20, 2013

Filed under: Business Succession Planning — Neel Shah @ 11:00 am

A succession plan is an important tool for any business owner who wishes his or her business to continue on after his or her death. Essentially, a succession plan allows a business owner to dictate who will take over the business and under what terms after his or her death. A recent article discusses one major mistake that many business owners make in this process.

In the process of succession planning, the current business owner must consider the ownership and management of the business. These two areas are “different, but inextricably linked.” The mistake that many business owners make is that they attempt to deal with both ownership and management simultaneously. This decision to deal with these two facets combined often proves to be risky.

There are a multitude of reasons why ownership and management should be dealt with separately. First, changes in both areas may become quite complex. There may be many internal and external stakeholders with expectations for each role, which would be easier to manage on an individual basis. Secondly, dealing with these areas separately reduces decision-making pressure on all parties. Moreover, it allows you to address each separately, with more clarity and objectivity.

Considering ownership and management separately allows a business owner to create workable solutions for a successful transition.

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