Aldrich Law Firm, Ltd.
Aldrich Law Firm, Ltd.

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Succession planning for family businesses

A business succession plan can be the key to maintaining company profits and growth after the original owner steps down. The issue for many Nevada ventures, though, is that their owners fail to prepare for the next generation. It can be emotionally difficult to take the time to put together a succession plan because it requires an admission that the owner will retire, die, or become incapacitated at some point. No matter how qualified or accomplished the children, the parents may have questions about their ability to take over.

According to a survey by the Family Business Alliance, part of the National Bureau of Economic Research, 43 percent of all businesses that are family-owned do not have a succession plan in place. At the same time, approximately 75 percent of the owners plan to pass the businesses on to their children. The managing director of the SunTrust Business Transition Advisory Group opined that business owners don’t address succession in many cases because they are so busy handling daily operations.

The same ownership attributes that make businesses successful should lead to smart succession planning. Without it, the family may end up in legal disputes. Generally speaking, the earlier ownership starts planning for succession, the better.

Ten years should give enough time for the owners to address issues like taxes, estate planning, voting rights, liability and ownership stakes. An attorney with experience in business planning might be able to help clients plan for succession by suggesting transfer mechanisms that minimize taxes or avoid probate.

Source: Forbes, “How To Make Family Business Succession Successful“, Richard Eisenberg, Jan. 22, 2019

John P. Aldrich
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