Transcript Transition Planning - AgEBB

Transition Planning
Objectives
• Identify strengths & weaknesses of the
operation that will affect succession of the
farm
• Identify what you hope to accomplish
through Succession Planning
• Outline a Succession Plan
• Understand differences in business entities
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Transitioning
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Mission Statement
Goals & Objectives
Business Entities
Taxes
Communication
Transitioning
• Many farm and ranch families have the
long-term objective of “passing the business
on to the next generation”
• REALITY:
– Only 30% of family owned businesses
successfully transfer to the 2nd generation
– Only 15% make it to the 3rd generation
– Only 5% make it to the 4th generation
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• Successful transition planning is a process.
– What are the businesses current strengths,
weaknesses, financial position ?
– Spend some time with all stakeholders
developing a shared vision, objectives, and
goals for the business and for family members
involved.
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– Develop a workable plan to move the business
forward.
– Implement the plan.
– Monitor progress and, if necessary, modify or
improve on the plan to keep the business on
track to achieving the vision.
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Step 1
– Study your current business situation.
– Look at financial records, including assets and
liabilities
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Step 2
Develop vision and mission statements.
A vision is a long-term concept
A mission statement is a broader vision.
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Step 3
– Define objectives and goals for your operation.
– “goal-setting”
• What do we want to achieve?
• How can we go about achieving this?
– Clearly defined, written goals are essential.
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Step 4
– “Business Structure”
– Three categories of business structure
• 1. Organizational Structure
• 2. Legal Structure
• 3. Financial Structure
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Tax Considerations
• Involve Professionals
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Transferring Assets
• Sale
• Gift
• Through an Estate
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Determining Income Tax Basis
• Defined… The cost to recover when an
asset is sold.
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Tax Basis & Transfer Plans
• It is important for parents to consider tax
basis.
• Also, keep in mind the tax basis that heirs
will have in the assets they acquire from
parents.
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Transfer low basis property
• Consider transferring through the estate
– Stepped up basis
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Transfer high basis property
• Consider selling or gifting.
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Transitioning
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Mission Statement
Goals & Objectives
Business Entities
Taxes
Communication
Other Choices
• What if I have not desire to pass the farm
on?
– Sell the farm
– Rent out ground and leave to heirs
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Questions
Mary Sobba
University of Missouri Extension
Agriculture Business Specialist
(573) 581-3231
[email protected]
Communication
• Does this really affection Succession
Planning?
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Communication
Paternalism and Autonomy Theory
• Paternalism is taking care of someone.
• Autonomy is wanting to retain a person’s
independence.
• Examples from Scenario 1:
• Paternalism: John wants
Dad to slow down.
• Autonomy: Dad wants to
remain his own boss
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Politeness Theory
• The person who initiated the conversation is
respectful of the other’s opinion.
• What he or she says allows the other person to
“save face.”
• Examples from Scenario 3:
• John: Do you see yourself
coming back to the farm?
• Brother: I always assumed
you would take over
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Communication Strategies
• Direct control:
• The speaker wants to take
control.
• Indirect control:
• The speaker is flexible and
will share the decision making.
• No control:
• The conversation is neutral.
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Other Factors
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Attitude
Preparation
Timing
Behavior
Questions
Mary Sobba
University of Missouri Extension
Agriculture Business Specialist
(573) 581-3231
[email protected]