What will happen to your business when you are ready to move on to retirement? Or if suddenly you are simply not able to run the business? Or upon your death? None of us want to think about the time when we are no longer working; when you are the owner of a family business, the decision can become very emotional. You have a different relationship with your family members than with your staff or colleagues.
Perhaps your first thought is to leave the business to someone in your family, but that can be a large undertaking. If there are multiple family members involved, the reality is that many don’t get along with each other. There are issues of control, love, money, equality, and taxes. The alternative of not making the decision, or leaving the business in the hands of a stranger, can arouse even more concerns.
If you decide to keep the business in the family, be aware that you are leaving the entire operation to the family. You should have a plan to ensure that the new owner or owners have adequate knowledge and training to keep the business successful. Here are some thoughts for ensuring a smooth transition:
- Create a plan. No one can afford to leave a business without leaving behind a plan for how the successor will gain the knowledge, technical expertise, and skills to run the business and be in control.
- Teach them. Teach potential successors every aspect of the business, and do this over a long period of time, if that luxury is available. There is no substitute for learning directly from the owner.
- Get a mentor. Sometimes personality conflicts can make it difficult for a parent and child or sibling to work together. An outside mentor can work with the family members to smooth the relationship, and keep the successor on track in learning the business.
- Create a group of advisors. A group of outside advisors can be very helpful in selecting and training a successor. The owner needs to set guidelines for hiring and dealing with family members, and developing qualifications for various positions. The advisors can provide unbiased advice for these guidelines, as well as other issues.
- Understand the tax implications. Make sure that the tax implications of various succession scenarios are understood by you, the possible successors, and your family. Differences in the structure of an ownership transfer can have major tax consequences to all concerned.
You may have to face the fact that no one in your family is interested in taking over your business. We encourage you to have open conversations with your family members so that everyone can agree as much as possible on the end goal.
As always, please contact our office for support as you begin to think about the possible disposition of your business.
