Succession Planning for Privately-Held Corporations
A privately-held corporation is a corporation that has shares not available for public sale. These corporations, therefore, have their shares held by a small group of people. These select individuals may encompass family members, managers, as well as senior executives. It should also be noted that due to the nature of privately-held corporations, they do not have a spot in the stock exchange, either.
There are a plethora of benefits to being involved in a privately-held corporation. For one, decisions can be made quickly. This is different compared to large corporations and public ones, since privately-held corporations don’t require the vote of countless shareholders before the approval of corporate initiatives.
Another advantage of a privately-held corporation would be the protection it provides for personal assets. This is due to the nature of corporations, as it protects individuals from legal liability.
Although privately-held, succession planning is nonetheless integral to the continual growth and success of a corporation.
Succession planning should begin early. This means developing a plan even before succession happens or is even considered by the corporate leader. This is because running a corporation entails a busy day-to-day schedule, priorities that cannot be ignored, and responsibilities on the top of the list that must be fulfilled as soon as possible. With such a busy schedule, succession planning may then move down on the list and eventually forgotten until there is an urgent need for it. Therefore, one should make sure to leave room for succession planning on a periodical basis to keep the private shareholders informed.
Another way to plan for succession involves initiating discussions with the private corporation’s trusted advisors. These advisors can be legal attorneys, experienced business managers, and certified accountants. By speaking with these trusted individuals, one can save time and be ensured that succession planning is dealt with correctly and professionally.
The succession process should be transparent as well. This means having all involved parties informed about the trajectory of the corporation through excellent communication. Making some time to ask for each involved party’s insight on the succession plan is, therefore, another integral part of corporation growth and survival.
Having a mentorship program may be useful, too. This is to ensure that the new leader of a privately-held corporation has the competencies and ability to run it. Therefore, one should start identifying the key and top performers of the corporation ahead of time and help them develop the skills the future role would require. This type of professional development can also pertain to refining existing skills, job shadowing, and programs that help with improving interpersonal skills.
Related to this, when one is hiring for a privately-held corporation, they should keep the trajectory of the individual’s career in mind. This ensures that these individuals grow with the corporation, know the ins and outs of it, and can help contribute to the growth of it.
Succession planning for privately-held corporations involves numerous factors and parties in order to make it right. The Prasad & Company LLP team has aided corporations for over 30 years and takes pride in the unparalleled results. To get in touch with a member of the Prasad & Company LLP team, contact either 416-226-9840 or firm@pra