It’s one thing to give your children your old car when you’re done with it. It’s another entirely to give them your business. And even though that’s what many retiring business owners do, there are plenty who don’t go about it the right way. Unfortunately for those, they may wind up creating a burden for their children, hardships for themselves, or hastening the end of the business they spent a lifetime building.
According to one survey, it’s estimated that two-thirds of family business owners plan to leave their companies in the next 10 years. And that means it’s time for questions – questions without easy answers. Should you hand the company over to your children? Should you sell it to an outside company? What will happen to your employees?
While some legal firms are comfortable discussing the consequences of a business owner’s death, there are fewer that hold thorough discussions around the lifetime transition of ownership, even though lifetime transitions are much more common. These transitions – in which buyers must put up their own money to buy the business and the seller needs to realize the value of his or her capital – are different from death transitions, which often are completely funded with life insurance proceeds.
And these lifetime transitions are further complicated by issues that include owner/employees vs. owners not employed in the business, founders with retirement concerns, and children waiting in the wings to become full owners.
Over the years, we have had success designing and implementing lifetime transition plans that help ensure businesses are successfully passed along according to owners’ wishes. Firm owner Don Sadowski’s family owned a small business, and he learned early the benefits and challenges of being in a family-owned business. It’s a perspective that can’t be taught, and one that helps him see your challenges through your eyes.