Steps to pass your business to family

Written By Steps To Faculty Published July 6th, 2010

Do you have a business that you would like to pass on to your family members someday? If so, then you may want to read on. Passing a business to family members can be a smooth transition, but if not well planned can be costly.

Step 1 Identify your business structure

A sole proprietorship is a type of business owned and managed by one person. In most cases, the business collapses when the owner dies. As the owner of the business, one must ensure that there is continuity of the business when he or she is not their. The children should be prepared in advance on prudent financial advisory and management practices so as to be ready for succession. A family – business constitution must be drafted to set guidelines for the attainment of the future vision of the business. Should your business be a limited liability corporation the changeover is automatic. In the event that you have a C corporation, a Board of Directors must approve in advance of your family taking the helm in the event of your passing it over to them.

Step 2 Get help

A specialized estate or business consultant should be brought in so as to advise on family business succession issues. These consultants include the accountant, a lawyer and a financial adviser.

Step 3 Include everyone

A strategy to devise an effective and efficient succession strategy must include all the family members. This will ensure all family members are aware of what has been discussed and this will avoid conflicts and misunderstanding in future. The owner should not leave the successors with a huge burden of debt and tax bill to pay as this may make them to sell the property to settle the debt.

Step 4 Put it in writing

The owner may also write a will and split the ownership to several members of the family or divide the clients among the family members according to each individual strength and ability to manage the business.

Step 5 Plan for contingencies

If the members of the family are not willing to manage the business, the owner can pass its management to an independent manager to run it on behalf of the family. Before the management is brought in all the family members must agree on how the business will be managed and how profits will be distributed to all the family members.

Remember, a little planning goes a long way. Please visit stepsto.com for more great business advice.


Roger Due

Investing in Your Destiny® & Coaching Program - Wealth Building Summit Dallas, Texas

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