If you’ve got a family business, at some point the time will come when you have to consider passing it on to a loved one.
After you’ve taken all of that time growing the business, giving it to a younger family member can be tough.
It’s been your life’s work, and passing it on shouldn’t be done with a plan.
1. Work with professionals
Passing on a business is more than just handing it over to a relative.
Before you do anything, you should work with professionals, especially those who have been handling tax matters for nearly 20 years.
There are tax documents and legal documents that will need to be completed as well as several other considerations that professionals can help you manage properly.
Think of your group of professionals as a temporary board of directors who will help ease the ownership and management transitions.
2. Create a scenario
The idea of passing a business to a younger son or daughter can be a dream for some families.
Parents or grandparents might have an ideal scenario, almost romantic, of passing the torch.
As you draw up the scenario of passing it on, talk to your heirs about what they would like to do with the business.
In some families, the younger generation might have other ideas, and they might not want to work at the family business in their adulthood.
For many families, the key to the future involves communicating with each other.
The older generation might have ideas of what they expect to happen with their business, while the younger generation might have their own ideas.
It is important that both parties have time to talk to each other about what they want and how they will get there.
3. Talk to peers
Many times, business owners have other friends who are business owners.
It can be helpful for all parties to talk about how other business owners have passed their businesses to their children.
It is helpful to learn from other people’s experiences, as it is better to let someone else make mistakes.
But, keep in mind that what works for one group might not work for the other.
When you talk to your friends, ask them questions about what worked and what didn’t.
They should be able to tell you what happened after the business was transferred, so you can decide if you want to be involved after the torch is passed.
4. Have flexibility
As a business owner, you should know that things don’t always go as planned.
In some families, the older generation sticks around to help the younger generation get started.
But, in others, the torch is passed and the older generation is done.
The best strategy is to do what is best for the business and for the family.
Every business and family is different, so you should make decisions that benefit your situation.
Having flexibility and regular, honest communication will keep the family together.