For business owners, estate planning is often wrapped up in business succession planning. The business is the most important and most valuable asset that the individual owns. They want to give it to their children so that it can continue running and providing an income for the next generation.
The trouble is that family businesses often struggle to survive when they get passed down between the generations. Some sources claim that the average business will not last through the third generation, and that many businesses will even close before they reach the second generation.
If you’re a business owner and you’re planning to pass your business on to your children, you do need to address this. Below are some tips that may help set your business and your family up for success.
Start the training early
First and foremost, bring on the heir that you would like to have run the business as early as you can. The goal should be to give them on-the-job training so that you can show them the ropes while you are also still working at the business. You may want to start this process three, five or even ten years before leaving the company yourself.
Consider their strengths
If you have multiple heirs, you also want to think about all of their strengths and weaknesses. Do not assume that they all need to be equal partners. Find roles for them that they are going to excel at so that the business can thrive.
Find out what they want
Finally, business owners sometimes assume that their children want to take over the business when the children actually are not interested. It’s very important to know what your children want, what they expect and how best to address these things in your estate plan. For instance, it may be better to simply sell the business and pass the money on to your heirs.
Setting it up
As a business owner, it’s quite important to do everything you can to put your business in the best possible position. You also want to consider the best future for your family. Learning how to work through estate planning and business succession planning is one way that you can do both things at the same time. Be sure you know what options you have.