Succeeding with Succession

Running a small business is not for everyone, but younger family members often want the challenge of taking over when founding generations retire. Here’s how you can work toward continuing the family business from one generation to the next, even in times of uncertainty like these.

Start with a Plan

Next, communicate frequently with your successors. You may have differences over how to run the business, and you’ll need to resolve them—you can’t run the business forever. You will want to create a development plan that allows family successors to gain the crucial experience necessary to run your concern. And you may want to begin making shared business decisions that allow your loved ones to get hands-on experience running the company.

Money Matters

Your sale price and schedule of payments may be included in your buy-sell arrangement, and you’ll also address tax responsibilities, the value of business assets and total liabilities. You also may want to address potential liquidity issues to avoid future problems for both the seller and buyers. Pre-paying the transfer, whether through gradual ownership shares while working together, contributing to a sinking fund or purchasing a life insurance policy, might help address any potential liquidity issues.

Begin working toward an agreement as soon as you and your loved ones decide family succession is in everyone’s interests and review your succession plan regularly, because change happens.

Most important, work with qualified legal, tax and financial professionals to come up with a plan that benefits you, your family and your business.