A Nashua, New Hampshire business owner has concerns about business succession planning for her family business.
A business owner who is nearing retirement age recently asked what were some initial issues to consider, right now to help to transition her successful small business to her children. The following are some basic questions all business owners should ask as they consider their family business succession planning:
Do you have a management succession plan in place?
Family business owners are notorious for neglecting to have a management succession plan in place. By management succession I mean a realistic determination of who in the family is capable, if anyone is, of taking over the business when the senior generation retires.
Should your plan contemplate children with different skill levels or interest in the business?
For a succession plan to be successful, it is necessary for the senior generation to take into account the differing skill levels, or interest in the business, of siblings. If there is a daughter who is clearly the one to take over, that does not mean the son who is interested in the business is ignored. Planning must be in place to avoid family conflict that could destroy the business.
Have you considered the impact of Probate and Estate Taxes on your family business?
As the goal of business succession planning is to transfer the family business to the next generation in a manner that increases the probability of success, estate taxes and probate avoidance are a prime consideration.
Are you willing to make gifts of interests in the family business to your children, or trusts for their benefit, if you can maintain management control?
Unfortunately, many family business owners do not appreciate the fact that they may begin transferring interests in the business when their children are quite young and still maintain absolute control. Estate planning attorneys have devised strategies that enable a parent to give it away, but control it absolutely.
Do you have an overall estate plan in place?
All of your estate planning documents must be carefully designed to fit together to create a business succession plan that works. In fact, it is possible to integrate a revocable trust as the owner of business interests. In that manner, the business owner, or her successor trustee in the event of an incapacity, is able to manage the business entity without the necessity of a conservator or guardian.
Do you have a buy-sell agreement in place?
Closely held business owners, including family businesses, often enter into buy-sell agreements to assure that the business remains in the hands of suitable owners and/or that a ready market exists for a departing owner’s interest in the event of certain triggering events such as death, disability, retirement etc.
If you have questions about family business succession planning you can contact Attorney John S. Polgrean of the Trust and Estates department of Welts, White & Fontaine, P.C. at (603) 883-0797.
This blog is intended for informational use only. The information contained herein should not be construed as offering legal advice or a legal opinion. At Welts, White & Fontaine, P.C. our lawyers have experience with representing families and closely held businesses. We have balanced business plans with family and estate plans and we can help you develop strategies for a successful family owned business.