The family business often fails after the retirement or death of the founder. Numerous factors account for this, but it is essential that when making your estate plans you and your College Station estate lawyer include a process for maintaining the business successfully into the next generation.
Failing to Plan
Despite appearances, the family business is still the financial backbone of the U.S. Nearly nine in ten businesses in this country are family-owned. This is not to say that they are all, or even generally, small companies. Numerous family businesses are among the Fortune 500. Unfortunately, even when a person has planned his estate well in other ways there is often little attention paid to the family business.
The main reasons family businesses fail upon succession appear to be due to either taxes, lack of funding, or failure to prepare another individual to assume leadership. It is not always wise simply to leave your business to the care of your spouse. Unless this individual has worked closely with you and understands the business, it is better to seek out a family member to prepare.
Preparing a Succession Plan
When including a business succession plan in your estate preparations, it is important to have in mind an indivual to assume the leadership role. Make sure to prepare this individual by familiarizing him with processes, operating procedures, funding, and the roles of the various key individuals who help run the company. It is very important that the person you prepare has an understanding of your business’ mission, and possesses a similar vision.
You should consider including a business buy-sell agreement in your estate plans. This provides for the transfer of the interest in your business when one of a number events occurs:
- Death of the founder
- Retirement of the founder
- Disability of the founder
The buy-sell agreement ensures that the transition of your business will be smooth because it binds the parties involved to the terms of the agreement. The buy-sell agreement is also beneficial for clarifying roles when more than one individual will assume some control of the business.
For Further Information
With careful estate planning, your family business can continue to provide an income to family members after your death as well. Your College Station business lawyer can provide you with guidance on how to plan for a successful transfer of your business. Call Peterson Law Group to arrange a consultation today at 979-703-7014 or 936-337-4681.