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Who will take over your family business?

Whether you inherited your business from a loved one or built it into what it is today, you may want to pass your company to your children or grandchildren. However, when a business will stay within the family, business owners may want to take additional steps to protect both their business and their family from conflict. What steps can you take to safeguard what matters most?

Having a plan in place is important, but many businesses do not lay that groundwork.

Many business owners expect the family business to continue with their children or grandchildren. However, while 69 percent of the family businesses indicate that they want the business to stay in the family in the next generation, less than one quarter of businesses have a succession plan in place. Not having a plan can lead to conflict about who will run the business, what direction it will take and who will receive its profits. Preventing this conflict often depends on having both an estate plan and a business succession plan.

Speak openly with all heirs about the succession plan.

Businesses are a valuable asset, and there may be conflict among your loved ones if you do not speak to them about business succession. Speak with potential successors about their interest in running the business, and take the time to explain your plan and its reasons to heirs who will not have a stake in the business. These discussions will help them understand your reasons for planning business succession in the way you have, and they will prevent your heirs from feeling that they have been treated unfairly.

Take time to train your successors.

As the Harvard Business Review notes, employees from outside the family can view family employees as less accountable or responsible, especially if they do not know your successor. This can lead to difficult transitions when the business changes hands. Training your successor familiarizes them with both their role and the workforce to help ease those difficulties.

Have your documentation in order.

Estate planning and business succession planning can be complex, and it can be beneficial to work with professionals to lay the groundwork for that plan. Consider speaking to financial advisors to ensure that your business is prepared for the transition, and work with an attorney to ensure that your documents make your wishes clear and enforceable.

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