Sometimes family business operators are aware that after they pass away their businesses will not remain under family control or may cease to exist entirely. If no one in the family is interested and capable of running the business, then it is generally understood that it will not remain under family control.
Those situations, however, do not entirely account for the fact that 70% of family owned businesses fail in the second generation. There are a great number of cases where the family does want to keep running the business, but is unable to do so.
When that happens it is often the result of inadequate planning as Bloomberg points out in "Keeping It in the Family."
A key problem is that succession planning for a family owned business is more difficult than it is for other businesses as there are more stakeholders involved. If the business represents a large portion of an estate, the founder must also plan for how relatives not involved in the business will receive an equitable inheritance.
One of the common mistakes people make is to give ownership control to family members who are not going to be involved in the actual running of the business. That creates tension and fighting with family members who are running the business.
Just because succession planning is more difficult for family owned businesses does not mean that it is impossible. With proper succession and estate planning the business can thrive long after the founder has passed away. For that to happen it is important to not delay the planning, but instead to start as soon as possible.
Contact a qualified estate planning attorney to help at all stages of the succession planning process.
Reference: Bloomberg (April 21, 2016) "Keeping It in the Family."
To learn more about estate planning, how to avoid probate and make it easy on your family if something happens to you, click the link to receive a copy of our book on The Basics of Estate Planning in Alabama or visit events.adamsmillerlaw.com/Workshops.html to register for one of our free estate planning workshops or simply call us at 256 251-2137.