Despite the particular challenges of running a family business, the successful ones recognize that their longevity depends on keeping customers, employees and shareholders happy. “We don’t like the idea of family business,” Andrew Cornell said. “We like the idea of business family.”
Getting the business started is one thing. While there are thousands of resources available to help a small business get off the ground, staying in the air is the real challenge.
Certainly, this challenge is uniquely complicated within the context of a family business.
Planning for the family business is as much art as it is science. Even though the law (science) is oftentimes fixed and immovable, the family dynamics (art) vary from one to the other. A recent article in The New York Times titled Family Businesses Learn to Adapt to Keep Thriving is not only spot on, but timely.
According to the Family Business Institute, only about 30% of all family businesses survive beyond the founding generation. Ouch, but it gets worse. Thereafter, the success rate drops to 12% after the transfer to the third generation.
The New York Times article identifies key traits common to a successful family business succession. One key to remember: If the business is a family business, then it is essential to treat the family as “family” and the business as “business.” In other words, avoid the temptation to “gift” positions in the business to family members, unless they truly are productive and motivated workers within the business itself.
In the end, what is best for you, your family and your family business will depend on many factors. Plan accordingly and enlist qualified legal counsel early and often.
You can learn more about estate tax planning on our website. Be sure to sign up for our free e-newsletter to stay abreast of issues like these that could affect you, your loved ones and your estate planning.
Reference: The New York Times (April 4, 2012) “Family Businesses Learn to Adapt to Keep Thriving”