21 Steps: Checklist for Business Succession

Nov 16, 2022 | Uncategorized

The world of business is precarious and fraught with many unknowns. Various events can cause even the most stable businesses to quickly slow down or close. If something were to happen to you as the owner, you need a plan. For this reason, experts recommend that business owners have a succession plan. However, a succession plan is not a one-and-done kind of strategy. It requires a significant amount of time, planning, and revising. Here is a checklist for business succession that you need to consider while planning.

  1. Understand the importance of business succession planning. If you die suddenly without a business succession plan, the laws of the state will govern what happens to the assets and, in many cases, this is a costly endeavor that often leaves the employees out of a job and the family of the deceased owner is left with very little. When Sheldon Adelson, the casino multimillionaire, died without having a succession plan, his global enterprise came to a standstill. Small or big, all types of businesses need succession planning to ensure the survival and stability of the business. You should have a business succession planning checklist.
  2. Acknowledge what stakeholders want. With large businesses, the key reason for succession planning is to ensure the continuity of the business and keep the mission alive. Stakeholders usually want to see future successors who can boost growth and build the business. While the goal of succession planning may be to cash out or transfer the ownership to the next generation, it can also provide the owner with a retirement package and insurance, including the strategic transfer of intellectual property.
  3. Know your family’s goals. When you have a family-run business, succession planning can be complicated due to the laws of inheritance. Some of the heirs may have an aptitude and interest in the business while others may not. The business owner needs to discuss with the relevant family members whether to keep the business running or sell it. There can be difficulty in determining the best outcome for the business as different heirs may have different goals. It is vital to know ahead of time which heirs will make good successors.
  4. Include succession planning advisors. When transferring businesses, one will always face taxation and legal issues, like rights to any original works. Hence, large businesses should set up a team of professionals who can advise on taxation and securities law. Most importantly, you should include a consultant who specializes in succession planning. He or she will have a checklist for business succession.
  5. Identify all the potential limitations. For effective succession planning, it is important to identify all the potential limitations ahead of time. For example, if you have selected an external mid-level professional to run your company, you need to know his or her skill levels, qualifications, and ability to communicate and function as a leader. You also need to be prepared to face emergencies, like what if the present CEO suddenly died? What would you do next? How would you go about selecting an internal employee to run the company and what skills would need to be provided by that individual?
  6. Identify the successor role(s) that are necessary. In a major business, there may be a need for successors in several key positions other than just the top leadership role. If there is a business partnership, succession plans are necessary for all partners who own a share in the business. In a family-run business, succession planning is required for all individuals who will inherit the entity.
  7. Consider the status of the present CEO. For succession planning, you need to know when to start the process. For example, how old is your present CEO? Does he or she have any health problems? Is he or she planning retirement anytime soon? Are there any issues with the present CEO that may force early retirement? What are the financial risks the company faces if the incumbent suddenly becomes ill, disabled, or dies? Is the incumbent’s family involved in the running of the business and are there any plans for the family to be more actively involved when the incumbent dies? By knowing the answers to these questions and including them on your checklist for business succession, you can create a more effective plan.
  8. Develop a timeline. For effective succession planning, you need to have a timeline in anticipation of retirement, resignation, unplanned departure, or termination. In large businesses, you need to plan financial agreements between the two parties to ensure that there are no disputes later. The timeline of the incumbent should mirror the timeline of the incoming successor.
  9. Make a draft plan and share it with the appropriate individuals. Once you have identified your strategic goals and the timing of your succession plan, make a rough draft and review it with the operational team, human resources, or family members. Speak to all those concerned in the succession planning so that there is no disharmony later. The purpose and objectives of succession planning must be clearly established. Go through your business succession planning checklist to ensure all items are checked off.
  10. Consult with your employees and family members. Try to get some input from your employees or family members about your succession planning. While the endeavor should remain confidential until the stakeholders have had a chance to look at it, ask your employees to comment on the objectives and make suggestions. Sometimes the individual you want to take over may not be the right person and perhaps they can suggest other members for the candidacy of the job.
  11. Discuss compensation. Whether it is a large business or a small family-owned business, the discussion should define the role of the new successor within the company, the compensation that will be offered, any buy or sell agreements, and how the transfer of ownership will be done.
  12. Anticipate conflicts. The process of succession planning is not always straightforward; one may have to deal with conflicts and criticism of the plan with stakeholders and employees. To avoid these conflicts, it is important to communicate all decisions throughout the organization so that everyone knows where they stand when the transfer of the company takes place. However, inevitably where there is family business being transferred, one sibling may feel that another sibling is favored and, in large companies, accusations of nepotism are not uncommon. Thus, the owner has to be prepared to answer these criticisms and justify the selection of the future successor.
  13. Don’t forget the stakeholders. The owner must communicate and be transparent with the stakeholders. While the exact details of the succession plan can remain confidential, stakeholders have to be informed about who is being considered for the job, the financial implications, and the timeline. This helps build confidence and will be necessary if the stakeholders are going to support the successor.
  14. Speak to the potential candidate. When you are selecting potential successors for your business, speak to them in private and let them know what role they are being considered for. Also, assure every candidate that there are no guarantees, but if they remain a good fit and have the right skills, they will be offered the opportunity. In addition, you also have to judge the potential applicant. Ask these questions: Is he or she going to commit to a long stay with the company? Will the individual continue to advocate the same vision of the business? Is the individual willing to undergo accelerated training, rotate through the different departments, and spend extra time with the company mentors?
  15. Interview multiple candidates. It is always recommended that you select several candidates for the successor position. If you only choose one candidate and if he/she does not meet your expectations or is involved in misconduct or fraud, then you have to fire this person and start the search from scratch again. Therefore, you should interview a few people and don’t promise anyone the job just yet, but do tell them that they are strong candidates.
  16. Set acceptable standards. No matter who you select as your successor, do not set the standards too low. For example, if you select a successor for your family-run business, the potential candidate should have the same or higher education as you. If another employee has extraordinary talent, then he or she should be selected. But do not just give the job to anyone, even if you are desperate for a successor. Leadership roles require character, integrity, discipline, accountability, and high performance standards. If you set the bar too low, the business may not survive.
  17. Know what to expect of successors. When you are looking for a successor, you need to create a job description for the potential candidate. Beyond just taking over a business, the successor should have multi-functional tasks, and be exposed to legal, financial, and administrative issues. You want someone with strong communication skills, someone who can express him or herself both orally and in writing, and someone to continue to mentor the next generation of candidates. If there are any gaps in the candidate’s experience or skills, address how you will rectify them.
  18. Consider alternate scenarios. If, after selecting the candidate, there are disputes regarding the role, finances, or position status, you must resolve these differences before offering a contract.
  19. Develop transfer strategies. Once the successor has been selected, you will need to figure out how to transfer the business. Will it be a simple buy and sell agreement and how will the venture be financed? How will the successor guarantee the loan payments? You also need to consider the tax implications of the purchase versus a gift/bequest. You also may require the continuation of life, health, or disability insurance if you are no longer with the company so plan for that eventuality as well.
  20. Settling the departing owner’s equity. You need to have a plan for the distribution of ownership shares or profit to the heirs. If the business is not being sold, how will the successor settle the founder’s estate? Does the buy and sell agreement specify how the value of the business will be determined? What will be the tax implication of any inheritance, and will the estate provide for the family or children not actively involved in the business?
  21. Yearly review. Once the succession plan has been created, it needs an annual checkup to make sure that the goals are still valid and that things are progressing as suggested. Sometimes the successor may fall ill or become disabled, and the plan may need to be revised. You also have to consider an insurance plan for the succession.


Perhaps the most important step you can take is to seek the advice and counsel of an experienced attorney. Our team is well-versed in a business succession planning checklist and ready to help you. Through their expertise, they can help guide you through the process to a successful outcome.

A checklist for business succession is critical if you want your legacy to survive. For more information on how to prepare for succession, speak to a professional at Elder Law, P.A. today at 1-561-933-4728.

Elder Law, P.A.

Why Choose Elder Law, P.A.?

Free Consultations

10 Years Of Legal Experience

Knowledgeable & Compassionate

Call us

(561) 588-7512

The owner of this website has made a commitment to accessibility and inclusion, please report any problems that you encounter using the contact form on this website. This site uses the WP ADA Compliance Check plugin to enhance accessibility.