Passing the reins of the family business to the next generation can be a tumultuous but exciting time. Streamline the experience by considering the following advice from the ENLawyers.
Passing down the family business is nowhere near as simple as passing down your father’s wristwatch or mother’s diamond earrings. While the adage that family wealth does not last more than a couple generations still rings true, recently family businesses have had higher transfer success rates than in previous years. This means that with proper planning and guidance, your business can grow and prosper under new family management. In considering how to transfer ownership of your business, therefore, consider the following:
Are you Ready to Leave? Are they Ready to Join?
The most important questions to ask the during a family business transfer are often the most obvious ones. The current owner should be able to answer questions such as: when will you be retiring from the business? Are you prepared to fully relinquish control, or would you still like to maintain a voice within the company?
As for the next generation, are they prepared to step into a leadership role? Do they even have interest in joining the family business? Having a serious discussion about the future of the company with the family member or family who will be replacing you is a critical, but commonly missed step. Do not simply assume that the family wants to hold onto the business; prepare alternative options if they do not.
Have you Crafted an Exit Strategy?
Financial independence should be of utmost concern when considering your plans to exit your company. Draw out a timeline of what you will need and when you will need it. If the business is being handed down to the new generation, consider creating financial benchmarks for the company before relinquishing complete control. This will provide reassurance that the business is running well enough to provide you with a strong financial foundation for your retirement years, and ensure that new ownership and management of the company have been earned, not simply given.
Have you Provided Guidance and Education?
An empowered leader is a successful leader; create an environment in which your successor will flourish. Provide education not only on how things are done, but why they are done. In doing this, you provide both the tools for the next owner to succeed and the knowledge of how to use them.
Also consider appointing two boards: one of family and one of outside management. Family can make financial decisions, while the management board is tasked with day-to-day operations. Putting this management board in place will provide future owners with the tools to drive the business forward, mitigating any transition issues that could hamper success.
Have you Retained Legal Assistance and Representation?
There is no need to struggle alone with transferring your family business. Save time and worry by hiring an attorney with experience in business transfers and planning. An experienced attorney can help you decide on the most profitable and efficient way to push your business forward. For more information, or to schedule a consultation with a small business advisor, contact the Law Offices of Eldridge and Nachtman today!