Succession Planning For Family-Run Businesses
Sooner or later, everyone wants to retire. But if you own a family business, retirement isn't just a matter of deciding not to go into the office any more. Besides ensuring that you have enough money to retire on, the whole question of what happens to the business when you're no longer running it becomes paramount. Who's going to manage the business when you no longer work the business? How will ownership be transferred? Will your business even carry on or will you sell it?

Succession planning seeks to manage these issues, setting up a smooth transition between you and the future owners of your business. With family businesses, succession planning can be especially complicated because of the relationships and emotions involved - and because most people are not that comfortable discussing topics such as aging, death, and their financial affairs.

But comfortable or not, succession planning should be a priority for any family business. More than 70% of family-owned businesses do not survive the transition from founder to second generation. In most cases, the "killer" is taxes or family discord, both issues that a good family business succession plan will cover.

Think of business succession planning as broken into three main issues; management, ownership, and costs like duties and taxes.

It's important to realize that management and ownership are not necessarily one and the same. You may decide, for instance, to transfer management of your business to just one of your children but transfer equal shares of business ownership to all your children, whether they're actively involved in operating the business or not.

For many family businesses, family is the primary emphasis of succession planning. Whether you're thinking about the future management of your business, how ownership is going to be passed along, or taxes, you won't be able to help thinking about how your decisions will affect your family.

SMD advises on what you can do to make succession planning less painful and more successful for your family business.