Successful Family Business Succession Planning: What Makes It Work
We’ve discussed how the pandemic makes the right estate planning essential. There is perhaps no area of estate planning where this is more important than when it comes to family business succession, as many fail to remain a family business past the second generation precisely because family firms fail to properly engage in the succession process. For example, although preparing for estate taxes is very important, estate planning for the family business is about more than just planning for taxes, but rather, planning for the future leadership and continuing success of the business itself.
For many of these businesses, ensuring that there is a reliable family successor and employment opportunities for family members, without subsequent infighting and litigation, are amongst their most important goals, as well as their biggest challenges. As a result, many need buy-in from non-family member employees in order to successfully continue the business. This can actually end up being very successful, as a number of employees actually prefer the family-like culture of family businesses. However, in order to do so, it needs to be done right, whereby employees are assured that there is successor fitness, in order to be successful.
Below, we take some of the important general principles that apply to estate planning and discuss how they can benefit succession handoffs:
Being Upfront About Succession; Ideally During the Hiring Process
Having upfront conversations as early on as possible in order to provide employees with the time and heads up they need to prepare–preferably during the hiring process–so that surprises and discontent do not come up further down the road is ideal.
Fostering Relationships Between Nonfamily Employees & Potential Successors
Successors should get to know nonfamily employees as early as possible in order to foster trust and acceptance.
Ensure Accountability & Competence of Successor
Ensure that non-family employees do not have the impression that the successor only has his or her position due to nepotism, and, instead, ensure that there is the same level of accountability, responsibility, competence, etc. between the successor and nonfamily employees.
Involve Nonfamily Employees in Preparing & Helping Successor
Involving nonfamily employees in the training and preparing of the next successor can also help to ensure success and a smooth transition.
Other Important Issues
Other important issues that will need to be discussed with your estate planning attorney in case they involve non-family employees include who will own shares and mitigating estate taxes on transfer. This is especially important if any new owners are entering in terms of family limited partnerships, LLCs, philanthropic foundations, trusts, etc.
Work with A Florida Family-Run Estate Planning Firm
As business owners and a family-run law firm, our Orlando estate planning lawyers understand the pride that comes along with running and passing on a family business. We’ve been helping people and families here in Florida plan for their future for over 43 years, and we love what we do. Contact the office of Gierach and Gierach, P.A. today for a free consultation and find out how we can help provide the right planning services for you.