Family Business Succession is Dangerous Business
Family issues can be the hardest issues in any business sale, business succession plan or final business exit. Nothing is more difficult for a parent than to have to tell a son or daughter that they can’t take over the family business because they truly do not have the capacity. The only thing worse is to see a business flounder when an incapable heir takes over. I have seen that situation almost kill the child due to stress and disappointment. It is also difficult when one child is active in the business and others are not. Depending on the size of the business who should get what when Mom and Dad retire?
If you have a situation like this, there are many ways to hand down family businesses to limit third party liability, reduce tax liability and meet the different financial needs of the different family members. These are most effective when implemented over time. They can be quite complex and each requires thought, listening, empathy, and a whole lot of legal and tax knowledge. If you have a substantial sized business that you intend to pass on to heirs, get knowledgeable help early.
Consider this recent situation. The family business had been run primarily by the father and a son-in-law. The father had four daughters. Two worked in the business and two did not. The family also owned the building and real estate the business rented. The father’s initial plan was to give the business to the four daughters equally. While mathematically fair this NEVER works out. It took four years before the final transfer (and two more revisions during the year of the transfer) for a total of five years of planning in order to come up with a business transition plan where the family all agreed.
The good news is that the family did agree and they have a viable family business for another generation. They also can have Thanksgiving dinner together. That is a true victory.
Need advice for your situations. Call or contact Harvest today.
Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at firstname.lastname@example.org or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.
Gregory R. Caruso, J.D., CPA, CVA
Harvest Business Advisors