Owning a family business can be one of life’s most rewarding endeavors. Not only can you enjoy success in your profession, you can also pass it along to your nearest and dearest when you choose to retire or at the end of your life. However, you also have to make sure your family business stays in the family. Here at Bergmann & Good, we strongly advocate setting up your business the right way and re-visiting those operational documents as you grow, expand or simply as time goes on (and laws and statutes applicable to your business change). Operating Agreements and clear formation documents are all important parts of owning and operating your own business, but what about the later years? If you’ve set up your business properly, you should make sure that the next generation gets the best possible chance to succeed as well. Here are a few things to keep in mind when building a succession plan for your family business:
Who is going to take over?
A business should have a clearly defined structure. If you want a family business to survive passing down to the next generation (something that statistics show is often unsuccessful) you should ensure someone is lined up and ready to take over. They should be aware of all facets of the business and understand how runs. It is also worth informing the rest of your family and your employees about who their next boss might be rather than keep it a surprise. Nobody likes a surprise.
Who is going to assume financial responsibility?
A family business can also involve members who are solely investors rather than involved in the day to day operations. Any succession plans should also involve the input of investors as they have a financial stake in the business. Any changes need to follow the rules of the operating agreement or formation documents used when the business was first established.
Is the business going to stay in the family?
If there is no one who wants to take over the business, then your succession plan could be to just sell the business and leave your family to split the proceeds. However, you should inform your family members this is your plan since selling a business can be a long undertaking. You should have a business attorney already lined up for your family to contact in the event this is your plan, that way they will have to do as little work as possible in the event of a family tragedy.
You’ve worked hard to build you family business and you’d like to have it offer opportunity and prosperity to your family and future generations. Make sure you know what is going to happen after you are no longer around to run things. Give us a call, and protect your legacy. Your Grandkids will thank you.