Like many families in Westminster, yours may share a strong emotional bond that has been built up over decades of loving interactions. That bond may be strengthened even further if you all happen to work together in a family business. Yet few appreciate just how much such a bond can be tested when the topic of business succession comes up. You might think that your family members will be able to come to an amicable agreement regarding your business’ management once you are no longer involved with it. However, disagreements can quickly arise over business interests in even the most tight-knit of groups.
Oftentimes, those disagreements eventually cause family-run businesses to fail. Yet Forbes Magazine reports that as many as 70 percent of small businesses in America do not have a well-defined succession plan. The potential of family squabbles destroying the company you have worked hard to build should motivate you to create a succession plan right away (even if you fear that some of those you love may feel alienated by it).
Listed below are steps proven to be effective in planning your company’s succession:
- Consider your business’ future and allow those goals to influence your decision-making.
- Identify and name your immediate successors and they exact roles they will hold.
- Define and document a decision-making process that addresses the rights of all family members involved in the business, including stipulations for dispute resolutions and future leadership succession.
- Address business estate issues, such as distribution of company ownership and tax implications.
- Establish a transition plan to facilitate succession.
Your family should be heavily involved in this process. Do not set this up as an informal agreement; it should be documented and witnessed. Once created, consider entrusting it to an impartial third party (such as an attorney).