Benjamin Franklin famously said “If you fail to plan, you are planning to fail.”
From the very beginning, you had a plan for your business to succeed. You set goals and developed methods to achieve those goals. Your business has stood the test of time because you anticipated problems and solved them. But if your plan for success does not include how to pass the family business on when it is time for you to step away, your future generations will not be in the best position to carry on your successful legacy.
Succession Planning Is One of the Biggest Issues Facing Family Businesses
We are in the midst of the greatest wealth transfer in American history. The Wall Street Journal notes that older generations will pass on around $70 trillion between 2018 and 2042. As Baby Boomers reach retirement age and step away from their businesses, they are facing the realities associated with business succession.
Business succession planning is a strategy for passing on control of your company. For many family-owned businesses, this means transferring management and ownership to the next generation. In fact, roughly seven out of ten family businesses say they would like to pass their company on to their heirs.
Have a Multiyear Plan
The best time to start thinking about succession planning for your family business is when you start the business. The next best time is now. Ideally, you should prepare for succession at least five to ten years before your retirement. That should give you enough time to identify who in your family will take over particular roles, train them for the job, and make sure that you have the correct documentation.
Also, do not rule out having non-family members, including current employees, take over key management roles in the business. The business can remain family-owned and operated even if people outside the family have important positions.
Enter your succession planning with the understanding that you are not going to please everyone. One of the toughest parts of a family business is separating the personal and the professional, which is easier said than done. Consider bringing in outside advisers such as lawyers, tax experts, and wealth advisers to facilitate family discussions and provide a business-first perspective.
We can help!
Our attorneys can help you with your business succession planning. For assistance with these and other business law, tax planning, or estate planning matters, contact our office today!
Legal Disclaimer – The information provided is designed for general information only and is not intended to be legal advice, nor does it create an attorney client relationship. Consult an attorney before making any legal decisions based on your individual circumstances.