Think of this inevitable truth: Someday, you will exit your business.
For those who own a family business, this reality is difficult to swallow — maybe even imagine. More than 70% of family businesses, though, do not survive the transition to the next generation. This statistic is true for Maplewood to Minneapolis to New York and back.
After you are gone, how much of your business’ wealth will be left for your children? More importantly, will your children and your children’s children be able to maintain and grow that wealth over time?
Without taking time to plan for the inevitable, it’s almost impossible to make sure your business and wealth that you have long protected would be passed on smoothly to future generations. To preserve your wealth and legacy, read on.
Develop a Comprehensive Plan That Includes a Will and/or Trust
Get a local estate planning and business attorney in Maplewood to help you develop a comprehensive plan. Make sure that the plan includes a will or a trust, or both. Your estate plan should account for issues related to the transfer of your assets, which include the family business, as well as issues related to estate taxes.
Establish your action plan to ensure the business has enough cash flow to pay taxes. Make sure it also has enough cash flow to buy out a deceased owner’s share of the company.
Remember that estate taxes are based on the full value of your estate. So if it is poor in cash, but rich in assets, your heirs may be forced to liquidate the assets to cover the taxes, thus “detaching” your family from the business.
Communicate with All Your Family Members
Talk to all the involved family members about their wishes regarding the business. If possible, conduct an annual family governance meeting, and involve them in establishing a succession plan to smoothly transfer ownership to the next generation.
You might want to include your in-laws, too, as well as experts in these meetings. Some may offer a fresh perspective, and may have skills that will help the company.
You have worked hard over your lifetime to build your family-owned enterprise. Don’t let it fall when it’s your time to retire. Focus your priorities now to ensure a smooth transition that preserves your legacy — for the next generation.