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Transition Planning

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. Transitioning. Mission Statement

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Transition Planning

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  1. Transition Planning

  2. 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

  3. Transitioning • Mission Statement • Goals & Objectives • Business Entities • Taxes • Communication

  4. 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

  5. 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.

  6. 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.

  7. Step 1 • Study your current business situation. • Look at financial records, including assets and liabilities

  8. Step 2 Develop vision and mission statements. • A vision is a long-term concept • A mission statement is a broader vision.

  9. 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.

  10. Step 4 • “Business Structure” • Three categories of business structure • 1. Organizational Structure • 2. Legal Structure • 3. Financial Structure

  11. Tax Considerations • Involve Professionals

  12. Transferring Assets • Sale • Gift • Through an Estate

  13. Determining Income Tax Basis • Defined… The cost to recover when an asset is sold.

  14. 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.

  15. Transfer low basis property • Consider transferring through the estate • Stepped up basis

  16. Transfer high basis property • Consider selling or gifting.

  17. Transitioning • Mission Statement • Goals & Objectives • Business Entities • Taxes • Communication

  18. Other Choices • What if I have not desire to pass the farm on? • Sell the farm • Rent out ground and leave to heirs

  19. Questions Mary SobbaUniversity of Missouri ExtensionAgriculture Business Specialist(573) 581-3231sobbam@missouri.edu

  20. Communication • Does this really affection Succession Planning?

  21. CommunicationPaternalism 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

  22. 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

  23. 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.

  24. Other Factors • Attitude • Preparation • Timing • Behavior

  25. Questions Mary SobbaUniversity of Missouri ExtensionAgriculture Business Specialist(573) 581-3231sobbam@missouri.edu

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