Remember that day when you opened the doors to your business for the very first time? Remember the images you had of the day that you would proudly and with all the pomp and circumstance, hand the keys over to your adult children? Did you ever think past that? Most of us don’t. We don’t see the logistics because, well, frankly, those logistics are details that didn’t need our attention at that moment. But now they do. No one doubted you’d someday want to retire nor were there doubts that the children would take over. You might have begun building a foundation with your estate planning, but now it’s time for the more detailed legal and financial protections to be put into place. It’s time to officially pass the torch of your family owned business.
Putting the Family Owned Business to the Test
It’s time to face some of difficult (and awkward, time consuming, frustrating and stressful) issues of moving a family owned business to the next generation. Those issues may likely mean you’ll have many questions:
- How will your adult children find the money to cash out the current owners? Odds are, if they’ve worked for the family business for years, you may know as much about their finances as they know.
- What happens if siblings begin to disagree, especially if one has managed to save more money than her other siblings? There could be resentment.
- And what about you? Are you going to be able to truly step aside and allow them to continue what you began?
- What about significant management conflicts between the new co-owners/family members? Can they agree on what the family owned business looks like moving forward?
Shared DNA, Shared Frustrations
These are very real questions and potential problems family owned businesses must weather. It’s challenging, mostly because there’s a lot of shared DNA, history and if you’re like most, no shortage of “You’re just like Dad!” comments. It’s less about anger, but more about frustrations and even fear. And then there’s that one mind-boggling statistic:
More than 75 percent of family owned businesses do not successfully transcend the generation and will fail when the business is handed down the first time.
Estate Planning and the Family Owned Business
For these reasons, and many more, taking the time to understand the legalities and complex financial hurdles is absolutely crucial. If you’re preparing to hand down your business, odds are, you’ve made some provisions in your estate plan. But how do you know the laws haven’t changed? How do you know you’re taking advantage of every tax benefit? Do you know the realities of creditors and former spouses and their efforts of taking over something that you built, even though you had nothing to do with the money problems and marital problems of another family member?
If you’d like to learn more about the intricacies involved with ensuring a successful transition of your family owned business, our estate planning lawyers in North Andover welcome the opportunity to put those protections in place. Contact us today.
- What You Need to Know to Protect Your Special Needs Child - May 30, 2023
- How Tax and Non-Tax Considerations Impact Estate Planning – Part I - May 25, 2023
- The IRS’ Annual Warning: The 2023 Dirty Dozen - May 23, 2023
