Saturday, September 21, 2019
Helping Family Businesses succeed.
Have a Question? We can help. click to Ask an Expert.

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 generation.

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

| Terms Of Use | Privacy Statement
Copyright 2019. Broadway Bank. Content is not a substitute for legal and tax advice