Family owned businesses are special businesses…they have usually been built from an idea or concept and turned it into something wonderful. Kudos to those of you who have made this happen for you and your family. But does this mean your children are “entitled” to your business?
There are two camps on this topic. One says that because they are “family” they should be entitled to inherit or take over and run the family business. While this sounds noble, in today’s highly competitive business world, this could mean the death of a business and adversely impact the family members who work in the business. This is not the right solution unless the family members can run the business.
The other camp says it should be run by whoever can keep it going as a growing concern…whether they are inside or outside the family. There are other lives at stake here…namely, the employees and others associated with the business who should be considered. Once a business is running it has greater responsibilities than just to the family.
Whichever camp you support, there are arguments for each side. This is “business decision” first not an emotional decision. The emotion almost always supports keeping it in the family to run and own. But this may not be the best decision for either the business or the family.
For example, what if most of the wealth of the family is held inside the family business? This is great if the business continues to thrive, grow in value, and throw off cash for the family members to enjoy. This is the ideal scenario…but, not one that always plays out. What if the business goes south and not only loses money (and cash for family members) but declines in value? This could make the family estate much smaller over time…sometimes quickly.
If the business is the nest egg for the family and keeps the owner’s spouse and children in good financial shape for years to come, it could be gone quickly. Here, the better answer would be to sell the business and use the money in other ways or invest in something that is more in control of the family members…preserving the present and future value of the estate. This would be a much better decision for the family.
There are lots of considerations in play when it comes to deciding if a business should stay in the family. I recommend scheduling a session with both a business advisor and your attorney to discuss the options and how they affect both the business and the estate. Only after an honest discussion should you make a decision.
If you have any questions about this, just ask. I can give you insights into how best to proceed. And if you want to schedule an initial complimentary meeting to discuss how to proceed, let me know. Whatever you do, do it before it comes down to the time when decisions must be made. Invest the time up front, and it will save lots of time and create peace of mind for you and your family.