{"id":898,"date":"2018-12-18T17:38:07","date_gmt":"2018-12-18T17:38:07","guid":{"rendered":"https:\/\/www.excelsisaccounting.com\/blog\/?p=898"},"modified":"2018-12-18T17:38:08","modified_gmt":"2018-12-18T17:38:08","slug":"family-businesses-need-succession-plans-too","status":"publish","type":"post","link":"https:\/\/www.excelsisaccounting.com\/blog\/index.php\/2018\/12\/18\/family-businesses-need-succession-plans-too\/","title":{"rendered":"Family businesses need succession plans, too"},"content":{"rendered":"

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Not necessarily. In one all-too-common scenario, two of the owner\u2019s children inherit the business and, while one wants to keep the business in the family, the other is eager to sell. Such conflicts can erupt into open combat between heirs and even destroy the company. So, it\u2019s important for you, as a family business owner, to create a formal succession plan \u2014 and to communicate it well before it\u2019s needed.<\/p>\n

Talk it out<\/p>\n

A good succession plan addresses the death, incapacity or retirement of an owner. It answers questions now about future ownership and any potential sale so that successors don\u2019t have to scramble during what can be an emotionally traumatic time.<\/p>\n

The key to making any plan work is to clearly communicate it with all stakeholders. Allow your children to voice their intentions. If there\u2019s an obvious difference between siblings, resolving that conflict needs to be central to your succession plan.<\/p>\n

Balancing interests<\/p>\n

Perhaps the simplest option, if you have sufficient assets outside your business, is to leave your business only to those heirs who want to be actively involved in running it. You can leave assets such as investment securities, real estate or insurance policies to your other heirs.<\/p>\n

Another option is for the heirs who\u2019d like to run the business to buy out the other heirs. But they\u2019ll need capital to do that. You might buy an insurance policy with proceeds that will be paid to the successor on your death. Or, as you near retirement, it may be possible to arrange buyout financing with your company\u2019s current lenders.<\/p>\n

If those solutions aren\u2019t viable, hammer out a temporary compromise between your heirs. In a scenario where they are split about selling, the heirs who want to sell might compromise by agreeing to hold off for a specified period. That would give the other heirs time to amass capital to buy their relatives out or find a new co-owner, such as a private equity investor.<\/p>\n

Family comes first<\/p>\n

For a family-owned business, family should indeed come first. To ensure that your children or other relatives won\u2019t squabble over the company after your death, make a succession plan that will accommodate all your heirs\u2019 wishes. We can provide assistance, including helping you divide your assets fairly and anticipating the applicable income tax and estate tax issues.<\/p>\n

\u00a9 2018
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