Creating a business succession plan

Have you considered your business succession plan? Business founders often want their company to continue beyond their lifetimes, managed by their children and, possibly, future generations. This can be a difficult process—raising issues that you’d probably rather avoid. But the strength and longevity of your business will be your reward. And we can help you put a plan in place, lending our expertise to help you identify, implement and adjust the strategies and techniques that might best serve you.

You’ve devoted years to building your company. When it’s time for your children or other family members to take the reins, you’ll need to devote the same energy, thought and planning to a succession plan. J.P. Morgan has 200 years of experience advising family businesses. So, we can help you with succession, providing best practices and guidance for your unique circumstances. 

Unlocking a successful succession

Approaching succession with eyes wide open can help prepare everyone involved. We can help you foresee the risks—and build a plan to mitigate them.

We find that businesses are more likely to succeed into the second, third, fourth and even fifth generations when they have prepared for five key issues:

1. Sudden change in management

Your business needs a contingency plan. Reviewed and revised periodically. To account for sudden management changes. That includes:

  • Articulating a clear vision.
  • Defining all roles and responsibilities.
  • Having structures in place to connect the family and the business.
  • Allowing family members a dignified, properly compensated exit.

2. Orderly transition

You don’t expect to leave your business for another decade or longer? Now is still the time to plan for a smooth succession. This entails:

  • Building a formal succession plan that covers the fundamentals.
  • Creating legal documents that guarantee the succession plan.
  • Formally training and integrating next-generation family into the business.

3. Estate taxes

The U.S. estate tax rate is 40%. Payment is usually due nine months after a person dies. This federal tax liability, often unanticipated, can put a tremendous burden on a family business. Many families are forced to liquidate a business to pay the estate taxes due—often in a hurry, and realizing less than the business’s full value. Preparing now for this obligation can help reduce the strain on your family later. And help ensure your business’s survival.

4. Concentration

One of the greatest threats to the owners of a family business is “concentration.” That is, tying up personal wealth in a business and subjecting it to the same risks. Moving some personal wealth from your business into complementary investments can safeguard against such economic vulnerability.   

5. Family involvement

Successful family businesses anticipate tension and disagreements long before they happen. You can do so by being clear in your business objectives. Take steps to include other family members. Your Private Bank team can help you create more effective family meetings and share strategies to open lines of communication.

What will work for you and your family?

Every business owner, family, company and stage of life is different. But when it comes to succession planning, they all require the same things. Careful, thoughtful and expert attention. Help identifying and implementing the strategies that might best serve them. And an experienced partner to make it all feel easy.

J.P. Morgan Private Bank offers you access to our specialists. Private business advisory. Fiduciary services. Investments. And more. Let us work with you and your legal, tax and business advisors to develop a succession plan. One that honors what you’ve built—and helps it thrive for generations to come.

Only a small percentage of family businesses continue to the third generation. A strategic succession plan can help you beat the odds.