If you are living your dream of owning and running your own successful family business, you have more at stake than just turning a profit. You have also built something that you could hand down to your children, allowing them to keep your creation alive and well into the future. This is why it is so important to start planning for a time when your family members take full responsibility for the care of the business.
But as you begin to make your transition plans, be forewarned that only a third of family-owned businesses are successfully handed off to the second generation. Some potential problems can sour the transition process which you need to look out for.
For example, when creating a buyout agreement, it may be a challenge to determine the true value of the business. This brings into question what financial figures best reflect what the business is worth. While the retiring generation may want to use a number from the balance sheet, the more accurate number would likely be found by utilizing a earnings capitalization model.
Also, you will need to go over your inheritance and estate plans, especially regarding how they involve the business. If these matters aren’t put in good order, your family could be faced with probate and tax issues upon your passing.
Of course, you have a lot on your plate at present just keeping your family business thriving, but you also want to keep a keen eye on the future. An experienced attorney who is well versed in the legal needs of family businesses can help you make and execute a plan of transition that will allow your family to continue to reap the benefits you have created with your hard work.