Navigating the family business into the next generation takes planning. Unfortunately, only 30% of all family-owned businesses survive into the second generation. It is important to have a succession plan in place to ensure the business thrives in the second generation. This plan should include taking into consideration each of the following:
1. Alignment of family interests. Aligning the interests between the current owners and the new generation. Are the visions for the future in alignment? Is the second generation prepared for the reins? Do the key employees and management respect the heir?
2. Financial returns. The current owners is looking to the company for their retirement income. How is value determined? Can the family member afford to purchase the business? How is the sale structured to ensure income for the current owner?
3. Interfamily disputes. When there are multiple children in the family and only one child works in the family business, this can create conflict. The situation can become more difficult if there is death or divorce within the family.
4. Estate and tax planning. The business owner must ensure that their estate plan reflects their business succession plan. Care must be given to proper tax planning prior to the transition of the company into the second generation.
Our attorneys can help you create a business succession plan that will ensure your business thrives into the second generation.