Running a family business can be extremely rewarding. It blends work-life with homelife, enables the older generation to pass their skills on to the children, and provide them with a way to earn a living. The young may embrace the tradition that may go back generations, ideally putting their stamp on the company.
According to Forbes, 75% of owners say they want to pass their business along to the next generation, but 43% do not have a succession plan. Often this is because the owner is so involved in the day to day running of the operation that they seldom pause to consider how to pass along the reins.
As with many parts of estate planning, those who do not adequately plan are leaving much to chance. The downside of this can involve fighting over a course forward after the owner dies. These disagreements can tear families apart and hurt the business’s reputation if it becomes common knowledge.
Ways to avoid succession mistakes
Business succession can be a part of any estate plan, but there are some essential steps to improving the transition’s chances of success.
- Plan ahead: The earlier, the better. Experts recommend ten years to address the estate planning, business taxes, liability, and ownership stakes. The long rollout allows the kids time to prepare.
- Determine who takes the lead: Businesses are not a monarchy where the oldest son gets the business by birthright. Some kids likely have no interest in being involved, so owners should not assume they will take on the responsibility. If there will be more than one involved, the parent should work towards identifying skillsets – one may be best suited for sales, while the other could make an excellent bookkeeper.
- Look outside the family: If the children are young or unseasoned, it may make sense to bring in a business advisor to help the family assume control when they are ready. They can also provide a neutral presence among a changing family dynamic.
- Letting go: Many have a hard time passing the reins after so many years dedicated to its success. But the next generation must get their chance to run the show without mom or dad looking over their shoulder.
No plan is flawless
Every business owner understands that life is unpredictable, but estate law attorney with experience handling business succession here in Louisiana can help. These legal professionals can provide steady guidance throughout drafting, updating and executing an estate plan involving business succession.