It’s all in the family – or is it?
A family business is just like any other business – producing profit for its owners. Legally, the a family business is defined as “any business in which two or more family members are involved and the majority of ownership or control lies within a family.”
This could be a farm, doctor’s office, manufacturing facility, or any number of other entities. Did you know family businesses account for half of the nation’s employment? (source)
Planning for the expected – and unexpected
Often, family businesses are handed down from generation to generation. An elder family member retires, turning the reins over to his or her next of kin.
Or an unexpected event happens that causes a change in the family business structure. We’ve all heard stories of disaster, tears, infighting and lackluster successors.
But many business owners don’t have a succession plan that covers the expected or unexpected transition.
Sadly, sometimes the business dies with them because of that.
Succession Planning 101
Succession planning can be fairly complicated. But a simple level plan is based on two basic issues:
- Who plans to take over when the owner(s) are done?
- What do you, as the owner, hope the business looks like in the future? What will be the structure for an unexpected transition or an expected transition?
When developing a long term plan for success, consider the following to answer the questions above:
- Understanding and working with the family members, possible future family (spouses, grandkids, others) and key employees interested in the business’ future
- Thorough understanding of the history of the business, market pressures, key vendors and consumers of the businesses services or goods
- Professional assistance in accurately assessing the current legal and accounting structure of the business
- Arriving at an accurate valuation or method of valuation for the business
What do you do now?
Once you’ve thought through the basic business points, you can create a plan.
First, start with a review of your personal estate plan. If you don’t have an estate plan, contact an attorney to guide you through this process.
Next, contact your attorney to ensure he or she is capable of working with a team to develop and finalize a workable plan. Finally, start creating your plan.
Good family business planning is not only smart – it gives peace of mind. Help your family gain peace and profit for generations to come.