Minnesota business attorney Aaron Hall explains when and why business succession planning is needed.
Business Succession Planning: Passing Your Business to Your Children Transcription
When our business owner clients start thinking about their future and trying to avoid the frustrations that can come from a parent/business owner passing away without any sort of plans in place for the business, we explain the process — the various options available to them and some times to avoiding family discord, promoting family harmony and really talking through in a transparent way how to pass along a family business to the children.
Most families have at least one challenge with the children. For example, you will have a child that is not involved at all or maybe not capable of being involved. Maybe a child has a disability of some sort and needs some sort of care. You might have children that don’t get along well. Maybe some children that are independently wealthy and so you don’t necessarily want them to get the same portion as others. Sometimes children have a great variation in age; one child may be in his/her teens, another child is married and CEO of your business.
There’s a lot of thought that goes into putting together an estate plan or a succession plan regarding the business. The key here is to pass along the business owner’s intent and goals which includes, typically, some really important values. Values like family harmony, not causing fights.
As you may know, fights over estates, business ownership and property in a will can be one of the most contentious and divisive aspects in family feuds. It’s one of the leading causes of family feuds besides divorce.
Many business owners think, “My family never got along and so I am going to give them the business together so they will learn to get along.”
If you think about that, if they can’t get along now, imagine them trying to make decision on a daily basis together when they have conflicting interests, family difficulties, spouses who may not share the same goals of all the other family members. These are complex issues.
You can avoid a lot of it by planning in advance. It doesn’t have to be expensive. Often what makes sense is to sit down with a succession planning attorney for one hour. You pay simple for the attorney’s time to explain: What is the process? How do we start putting together a blueprint? What kinds of considerations should we take in our particular circumstances that will be helpful to avoid conflict? How can we minimize taxes now?
That’s really going to depend on the individual’s circumstances of each business owner. It depends on what tax bracket you are in and how your money is made. Is it made through royalty? Selling a service? Selling goods? Does the business own substantial real estate or, possibly, inventory? Or, is it a very thin, small, light, flexible business?
How is the goodwill going to be passed along? Is the goodwill all in the particular owner who is currently running the business? If so, how do we transfer that to the potential future owners?
There are a lot of considerations in place and a good succession planning attorney can walk a business owner through the business issues and the family harmony issues.
You want to have a business attorney who can speak to you in business terms, who is going to minimize the cost, think about return on investment and also think about those intangible emotional relationship values.
If you think about it, once you are gone, what is most important is that the money supports the individuals, their relationships and their future harmony and happiness.
If you want a schedule a meeting with our law firm, we are happy to help families and business owners who have some relationship to Minnesota.
You can reach out to us at MinnesotaAttorney.com.