How do family relationships get in the way of business succession?
Business succession is normally designed to keep the family business in the family. Apart from having the next generation profit from the hard work and visions of the founder(s), there is an anticipation of leaving a proud legacy behind. Unfortunately, not all business successions work well. In some cases, they cause estrangements among family members; in others they result in the dissolution of the business itself.
In order for a business succession to proceed smoothly, it is essential to engage the services of a highly competent business succession planning attorney, one who is not only legally adept, but is experienced in, and sensitive to, the human aspects of preparing for retirement and transition of business ownership.
Why Transition Is Difficult
For business owners who have toiled long and hard over their lifetimes to accumulate sizable assets while building a successful business, it is not easy to hand over the reins to a younger family member, no matter how beloved he or she is. The sense of security, as well as the feeling of power, that ownership provides can be interrupted if the transition is not handled carefully. It is, of course, extremely important that the owner feel that he or she is in control of the transfer of ownership. This is particularly true because underlying the transfer of the business is the foreshadowing of the original owner's eventual death. This is one of the reasons that starting to think about and plan for a business succession early in the game is a good idea.
How To Ease the Process
A truly skilled and knowledgeable attorney can help to smooth the process of business succession. The lawyer's job is not simply to prepare the necessary documents, such as wills and buy-sell agreements. It involves recognizing the needs of each party and recognizing the invaluable resources each brings to the table. This necessitates recognizing and respecting the accomplishments of the seller in establishing the business and acknowledging the energy and innovative ideas the buyer provides.
Taking the Time To Do It Right
As anyone experienced in dealing with families knows, the process of making substantive changes takes patience. For everyone to be comfortable with the new arrangements, it is important that each party's concerns be listened to and addressed. Many meetings, often over a period of months, may be necessary for everyone involved to feel included in the decision-making process. In many cases, collaboration with other professionals, such as accountants and financial advisors is a good idea.
Part of what makes the process time-consuming is agreeing to and facilitating the price of any stock that is to be sold, whether to family members or third parties. Once the parties have agreed on the price, the method of payment has to be determined. Frequently, this problem is solved with the purchase of life insurance, but then comes the question of how the insurance premiums are to be paid. It is just such complexities that can lead to confusion or even dispute among family members. This is why the presence of an attorney with experience in such matters is crucial to the success of a business succession.