Almost every parent’s dream is to create a family business that will be a legacy to and source of wealth for his or her heirs. However, almost every successful entrepreneur spends more time growing the business than considering how the growing family will successfully operate and profit from the business after the founder is gone or retired.
Some traps to prevent your children, grandchildren and other heirs from killing your “golden goose” include:
- Not everyone can or should be employed in the family business.
- Each family employee must be properly trained, screened, and possess the necessary talent for their assigned responsibility.
- Not every business can grow as fast as your family can.
- Prevent ownership dilution by death, divorce, or an ever-growing family.
- Manage the business and enjoy your family separately.
- Avoid the bloodline/first born trap.
- Bring in non-family employees as appropriate.
- Do not force new operators to use the old operator’s methods.
- Give the business to appropriate family members and leave other assets to the rest in order to equalize your legacy.
- Get out of the way of new technology, markets, and ideas of the next generation.
- Be transparent with the family and avoid creating destructive competition.
- Don’t enable non-employed family owners to thwart the business with control or veto power over those that operate it.
- Consider protection or preservation of your business if you die before your heirs are prepared to operate it.
The lawyers of Brooks, Tarulis & Tibble, LLC addressed many of these issues for our clients and worked with other professionals who address them. If you have any questions or if we can assist you in this regard, please contact us.