When you have a successful family business that has been around for decades, perhaps even generations, you likely think it will continue to go that way once you retire or pass on. You are not alone in your belief. According to Business Law Today, 69 percent of family business owners assume children will take over the company.
However, the only way to ensure the continued success and family ownership of your business is through a thorough and valid succession plan, which only 23 percent of businesses have. Do not put your hard work and assets at risk based on familial expectations. Create a solid plan with a business law attorney to make the transition smooth and avoid family battles.
When family is not the best choice
As much as you would like to keep things in the family, members may be unqualified for the task. They may not be interested either, even if they take the position, causing the company to go downhill. On the other hand, they may want to take things in a direction of which you do not approve. Everyone may be fighting over who will be the boss, and they contend with other leaders and employees, as well.
The potential challenges are numerous. It is more important that you choose a successor that is experienced and has similar values and goals. You may find this person in the family, but do not be afraid to look outside.
How a succession plan helps
Of course, transferring ownership to an “outsider” may not go down well with your family. However, a strong succession plan can prevent legal disputes. Including your family in the process and transition can also help them accept and adjust better to the changes. You may even want to maintain some of their roles and powers but just have someone else in charge of daily business operations. You will also need to determine the division of shares and profits under the new structure.