Help Chart the Future of Your Family Business

A recent survey found that 27% of business owners expect to hand off their businesses in the next five years. And even though more than half of the business leaders who plan to retire believe their companies will stay in the family, it has been estimated that only about 36% of American family firms actually are passed on to a second generation.¹

The transition from one generation to the next is considered to be one of the biggest risks to the survival of a family-owned business, so it’s somewhat surprising that 47% of family firms have no formal succession plan.²

A thoughtful succession strategy not only outlines when and how ownership should be transferred but also takes tax implications, family relationships, and other sensitive issues into account.

Management Succession

Think realistically about who is most capable, motivated, and/or prepared to run the business. Because it may take several years to groom a successor, it’s important to identify potential candidates early. If no family members are interested in leading, you may want to consider tapping someone competent from outside the family.

Ownership Succession

Family members who are not willing to take on significant operating roles may still want to retain a stake in the company. How you decide to divide your ownership shares among your heirs and business partners could have a major influence on the future of the company. Involving family members in the process may help promote a smooth transition.

Keep Taxes in Mind

Because tax laws tend to change frequently, it can be critical to stay on top of potential estate tax issues. Trusts, buy-sell agreements, and/or insurance policies may be used to help reduce taxes or provide the funds to help pay them.

It’s a shame that some businesses must be sold either to pay estate taxes or because family members can’t agree on how to move forward. Forming a plan well before you intend to retire could help ease the transition to the next generation.

1–2) PricewaterhouseCoopers, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Investment Advisory services offered through Investment Advisors, a division of ProEquities, Inc., a Registered Investment Advisor. Securities offered through ProEquities, Inc., a registered broker-dealer and member FINRA & SIPC. Vision Financial Group, Inc. is independent of ProEquities, Inc.

Please be advised that presently Hal Holland holds a Series 7, 63, 65 license and provides investment advice in the state of AL, FL, GA, NC, SC, TN, and TX. For residents of other states, proper license registration must be obtained by Mr. Holland before proceeding further. No parts of this communication should be construed as an offer to sell any security or provide investment advice or recommendations. Securities offered through ProEquities, Inc. will fluctuate and are subject to investment risks including possible loss of principal.

Please Note: The information being provided is a courtesy. When you link to any of these web sites provided herewith, you are leaving this site. ProEquities makes no representation as to the completeness or accuracy of information provided at these sites. Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, sites, information and programs made available through this site. When you access one of these sites, you are leaving Hal Holland's website and assume total responsibility and risk for your use of these sites.