Ensure Your Business Lives Longer Than You Do
A goliath retailer like Walmart certainly isn’t
your average mom-n-pop store on main street, but these
two kinds of businesses share a lot in common. They are both family businesses,
and they, along with the other 17 million family businesses, make up
approximately 90% of all domestic businesses. As impressive as this seems,
however, the numbers begin to change when we discuss the concept of succession
and transitioning the business into the next generations. Though 80% of family
business owners hope to see their future generations take over the business,
only 30% survive the transition to the second generation. By the third
generation, this number shrinks to 12% and then to only 3% at the fourth
Because the majority of family businesses do not
successfully pass from the founding generation to the next, it’s important to
take formal steps to ensure that this legacy you’ve built lives on to provide
for your family’s future generations. Protect this substantial asset by
creating a succession and estate plan that will guide the transition of
leadership in the event of your retirement or death.
Begin by talking with all involved family members
about their business goals and their ideas regarding transitioning the business.
Get some outside perspectives as well, from trusted advisors or consultants. You may consider adding them to your board of directors to assist in transitioning your
business through future changes.
Then, an estate planning advisor can help you
develop an estate plan, which should include a will and/or a trust, for
transferring all your assets, including your business. Take steps to ensure the
business has access to enough liquid assets for paying taxes or to purchase a
deceased owner’s share in the business. Otherwise, your heirs may be forced to
sell off business assets to cover these costs. In addition, you can create a
buy-sell agreement that can dictate the future sale or transfer of stock shares.
In addition to establishing the transition of
ownership of your business, your succession plan should account for how to
preserve and grow your business’s institutional memory – its collected base of
knowledge and experience. Also outline the roles of all key players in your
plan: who will assume management responsibilities, and what family members will
benefit from the business. You can also develop policies to govern the hiring and
training of family members, including their management and compensation.
Once you have a formal succession and estate plan
in place, be sure to meet again with all involved family members and your key
employees, providing everyone involved with an understanding of your plan and
how the business will transition into the future. With these kinds of plans in
place, you can help ensure that your business lives a long and healthy life.
Contributing Source: uniqueestatelaw.com, trustandestates.com:
“Succession Planning” by David Thayne Leibell