Succession Planning for Family Owned Business
The secret to a successful transfer of an operating business to a son or daughter is to start long before the transfer is necessary.
Start by having discussions with your family about your goals to perpetuate the business with family owners. These discussions should start when your children are young but old enough to understand the concepts. Involve your children in the business with real responsibilities. Give them operational tasks rather than executive level supervisory responsibilities. Allow your children to learn the business from the bottom up.
For those children that develop interest in pursuing a career in the family business, begin to increase their level of organizational responsibility. Develop a formal educational plan, as well as an organizational leadership plan. Gradually increase their involvement in important strategic initiatives. Invite them to meetings with your accountants or lawyers. Also, invite them to board of directors meetings as guests. (If you do not have a Board of Directors, you should; at least you should have a board of advisors) Give your child an opportunity to learn what it means to run a business. Then give them an opportunity to demonstrate their developing leadership skills.
During the process, work with your CPA to address the financial and tax aspects of the business ownership transfer. There are many strategies to consider. Depending upon your goals and financial situation, you might consider gifting of ownership or a structured and tax efficient sale transaction. Most of these strategies are complex and require a fair amount of time to evaluate. Your investment into this phase of your plan is critically important. The financial structure of your succession plan will have a very important impact on the overall success of your family business succession efforts.
At Dopkins & Company, LLP we specialize in family owned businesses. We have assisted many of our clients with the creation and their implementation of a succession plan. We can help you too.
For more information, contact Thomas R. Emmerling CPA CFP at email@example.com.