Your Family Small Business Succession Plan

When your business succession planning involves family, a whole new set of variables need to be thought about.

In some ways, it is easier when you have family to leave your business to, in other ways it can be way more difficult as you add family dynamics to the mix

First of all, some statistics: according to the Small Business Administration and researchers at Baylor University’s Institute for Family Business, only 30% of family businesses survive from one generation to the next, and even fewer to a third generation.  The mostly commonly given reason for this huge drop is the lack of a plan for an orderly succession.

If you own a family business, and would like to see your business survive  into the next generation, there are a few questions you should address:

  • Do your children or grandchildren want to take over your business?  It is never a good idea to insist your children take over the business.  You know how much hard work it is to make the business you love succeed, imagine if it was not a passion.
  • Is the interested family member qualified?  Has that family member worked in the business?  Learned skills at school or on the job?
  • If you have more than one child, there are other possibilities to consider.  More than one of your children may want to go into the business, but it is possible that some will not.   Many of us want to treat our children fairly when we leave our assets in our wills.  Can you treat your children fairly if leaving the business to one child?
  • If no family members want or are capable of running your business, do you want to hire management to run the business while retaining ownership, or does it make more sense to sell the business?

This is not a decision the business owner should make on his or her own.  The best thing to do is to sit down with your family and discuss it.

One of the most important aspects of family succession planning is estate planning.  If you are ready to start planning for the next generation, contact your Long Island small business lawyer soon.

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