A family business comes with so much history. When you started your business, you may have intended to pass it down for generations — or perhaps the business was passed onto you.
Regardless of how you came to be in the position you are in, it’s always helpful to take the time to consider what will happen to the business in the future. Failing to do so could cause the eventual loss of the business.
Luckily, our team at the Generations Law Group is here to walk you through all the steps of business planning to ensure that doesn’t happen.
Let’s take a look at some of the factors to keep in mind in planning for the future of your family business.
1. Making Sure You Have a Business Succession Strategy
A business succession strategy is a plan that allows your business to keep running in the event of your retirement, disability, or death. Having a well-designed plan at the ready allows you to transition your business smoothly to the next generation, whether it be to family members, trusted employees, or a buyer.
For a family business, you might not think that you need a succession plan. It may seem obvious to you who you intend to transfer your business to — your child.
However, this simplicity can be easily complicated. For example:
- You may have more than one child
- There may be other family tensions
- Your child may not be interested in taking over your business
The company’s continued success requires that the member(s) of the next generation who will take over the reins have the business acumen and commitment needed to run it, which is where creating your succession plan comes in.
2. Beginning Next Generation Participation in the Business
Any successful business succession plan has an initiative for the growth of an employee. Professional development is essential for someone who intends to one day run the business.
This training can be accomplished over several years, after which you can start transferring management and ownership of the company.
Many business owners transfer management control of the business to the next generation first while staying involved to a limited extent as advisors and shifting ownership.
Participating in the company before the transfer also allows the next generation to get to know the other employees, establish trust with them and understand what they bring to the business.
3. Restructuring the Business, If That’s What’s Best
If more than one child is well-suited to run the business, you might want to consider shifting to a business structure that enables the smooth transition to multiple successors with minimal conflict.
For example, you could incorporate provisions that facilitate a smooth transfer into your partnership agreement or LLC operating agreement. An Idaho business attorney can help run you through your options.
4. Considering Three Ways to Pass Down The Business
You may think that handing down the business to your family might be an easy transfer. However, when you start getting into the legality, it starts to show how complex it is. There are three different ways to pass down as business:
- Selling your business: A good option if you require retirement money.
- A buy-sell agreement: You can stipulate how a partner’s share of a company may be transferred.
- A living trust: The business owner must first transfer the business to the trust, then name the intended successor as successor trustee to the trust.
All three of these have both pros and cons to them, but our attorneys at Generations Law Group can help you pick which one is best for you, your family, and your business.
5. Keeping Your Own Retirement in Mind
Think about your own needs for your retirement. If you will need a continuous stream of income, consider continuing to play a limited ongoing role in the company for which you receive a salary.
Alternatively, you could require your child(ren) to purchase the business from you, providing funds for your retirement needs in that way.
Contact Generations Law Group for help passing down your family business
Many family business leaders believe they can rely on the next generation to help them run the company successfully. Unfortunately, there are so many variables in Idaho business law that getting help should be the next step.
Generations Law Group knows that you have invested a lot in making your business a success, and it is hard to think about relinquishing ownership or control. But planning is critical in creating a lasting legacy for your family.
We can help you put a plan in place to successfully pass your business on to the next generation and ensure that you have a financially secure retirement. For a consultation, contact us today.