You’ve worked hard throughout your life to build a stable and successful family business, and now it’s time for you to pass the torch. Transferring power in a business, no matter the size, can be a very confusing and uncertain time if you do not properly prepare everyone involved in the transition.
If you’re at the point in your life where your children (or other family members) are ready to take control of the family business, take heed. The process should be carefully calculated. Take a moment to read through this brief look at some important things to consider when passing the family business on to the next generation.
Pass on a healthy business
Take a special interest in maintaining order and stability in your daily operations, so you don’t pass a mess down to your children.
Even if you are getting on in years, find a way to manage the small things. For example, your premise liability insurance should always be kept current. Pay the bills each month, and don’t pass on a money-sucker.
Selling the business to your kids
If you still want to cash in on your hard work, sell the family business to your successors. You don’t have to sell it at top price. You can give your kids a fair deal while following through with the lesson that everything you have in life must be earned.
Fair market pricing may not always be an option for your children, so look into the other ways in which you can transfer ownership through a sale. Check into a self-canceling installment note or a promissory note to find alternate routes for the sale.
You can gift the business to your children
Gift the business to your kids, and escape added estate taxes when you die. You may have to pay a gift tax, but there are ways around those charges. Talk to a lawyer before you set up the deal, so you know that you’ve set it up in the most lucrative manner for all parties involved.
Leave the business to your kids in your will
You can choose to wait until you die to pass on the family business, but you’ll have to formulate a legal last will and testament. Research the legal implications behind the transaction, so you may anticipate what’s to come.
If you choose this method of transition, it’s important that you maintain the integrity and quality of the business until you pass. You don’t want your children to inherit a mess.
Make certain you have a properly trained successor
While you’re still in control of the family business, it’s wise to train the person whom you feel most confident as your successor. Training your chosen successor gives you a chance to see what they’ve got to offer the business before the deal is complete.