Beyond the “Mom & Pop” corner store
The term “a family business” usually brings to mind a “Mom and Pop” store. Heck, they are still considered the economic back bone of many communities, along with woman-owned small business owners. However, in North America alone, between eighty (80%) and ninety (90%) percent of businesses are family owned. These figures also include Fortune 500 companies, such as Wal-Mart, the Ford Motor Company and Levi Strauss & Company. The aforementioned companies are multi-generationally owned.
One of the key elements of family business planning is consideration of challenges of familial cooperation. The majority of family members may all be in consensus of estate planning procedures, business forecasting and strategy development, however, if you have one holdout that disagrees with one or more business factors, this can present serious problems, often resulting in family tensions. Our family business lawyer understands family-business law and business succession planning for family business owners.
By adopting a strategic business plan, this will help alleviate some of the tension. Below are five (5) elements to consider:
- Business Strategy: Family business planning should include development strategies for stability, current growth and future growth (also referred to as generational growth). These yardsticks should include; assessment of the current and future marketplace, financial development and goals, technology updates, and a complete assessment of your competitors.
- Estate Planning, Succession: A family business can be compromised by instability and collapse during the transition from one generation to a successor generation. This is why it is so important to have a family business process in place before you hand off the business to another generation to lead the company into the future. It is a fact that two-thirds (2/3rd) of family-owned business collapse during generational transitions. An effective and well-written estate plan by the previous generations would have specified an outline of the steps leading to the transition, including: A buy-out plan, share purchase plan, shifting of company duties and responsibilities, these are just a few things a well-written estate plan would have. Gateville Law Firm are experienced Estate Planning and Business Planning attorneys. We welcome the opportunity to assist you with sound Estate Planning and Family Business Planning.
- Communication: This is crucial if your family business is going to succeed (present and future). Everyone needs to sit down and talk to each other, including holding regular corporate meetings. There is the option of having a third party facilitate communication in case a conflict arises during family business planning. A third party is not related to any family member and can present an objective opinion, plus bringing or defending litigation, and provide confidentiality and disclosure protection as well.
- An Oversight: Safeguards should always be considered and in place. One of the top concerns about family business is accounting security. A family business is not immune to financial fraud and embezzlement just because the books are being attended by a family member. Safeguards against fraud and embezzlement need to be in place, such as an outside forensic accountant to audit the checking accounts, having two signatures on company checks in excess of $500.00, the person recording all receipts (accounts receivables) is prohibited from generating invoices.
- Conflicts and Resolutions: Conflicts are daunting when it comes to family businesses and planning. The family business doesn’t just stop at the door when you exit the building; it goes home with you as well. Since the beginning of time, every family has dealt with a family rivalry at some point. This is applicable in the operation of family businesses. If a conflict continues to flourish, unchecked, this will lead to instability within the business (current and future). By implementing a third party, this can result in conflict resolution, thus providing a healthy working relationship between the business members.
The Strategic Succession of Business Plan
Here is an outline of the five (5) areas to follow for succession of a family business:
- Business Succession.
- Owner/Chief Executive Officer (CEO) Succession.
- Business Management Succession.
- Business Ownership Succession.
- Estate Planning for Business Succession.
The above-mentioned steps should always be in place and used sequentially for development of a strategic succession plan. In many areas of the family business, failure to create and implement plans will contribute to the demise of the business. Another key factor is having a team of trusted professionals on your side such as: An attorney, financial planner, certified public accountant (CPA), banker, an estate planning attorney and adequate business insurance are key factors in all business endeavors. Our family business attorney is skilled and experienced.
Other questions to ask are:
- Does this family business have a future?
- Would it be a better choice to sell the business?
- If the business goes forward, what will be required to make a successful transition?
- What would be the best way to accomplish a smooth transition?
Strategic planning concerning the personal transition of the family business owner is a huge step. Careful thought and consideration must be given to the capability; the shifting role and handing over the keys to the office, building or manufacturing plant are paramount. Is this person really capable of the responsibility he or she is about to undertake? Is he or she going to be a good decision maker along with the desire and ability to develop business interests? Will I be able to watch from afar? Would I be able to be a business coach when it’s necessary? Is there another person other than a family member that would be better equipped to run the company?
These are all things that need to be hammered out before the current Owner/CEO packs it in and calls it a night. How can this be accomplished? The answer to this question is; having a sound estate plan and strategic business succession plan in place.
A strategic business plan involves the family, business and non-business assets. The issues of who inherits what, why and how are central to the family business succession process. The aspect of estate planning is very closely linked to the strategic business succession plan.
- Should there be separate inheritances for family members who are in a management position and those whom are non-management?
- What would be a fair and equitable distribution to my heirs-at-law?
- What would be the best estate plan for my family business?
- What tax consequences should I be aware of for the successors of my business?
These are all very important questions and your answers should come from an experienced, qualified family business and estate planning attorney. The Robertson Legal Group, LLC has many years of experience assisting family business owners with strategic planning and estate planning.
ABOUT GATEVILLE LAW FIRM
Gateville Law Firm is a boutique family business and estate planning law firm. Attorney Robertson is a family business attorney concentrating in real estate, family business, and business law.
We are an experienced law firm serving clients in Will, DuPage, Kane, and Kendall Counties. If you are a family business owner in Will, DuPage, Kane, and/or Kendall Counties, the Robertson Legal Group, LLC is eager to assist you. The Robertson Legal Group, LLC provides excellent legal representation and partners with its’ clients to service their legal needs.
WILL COUNTY OFFICES
Gateville Law Firm
220 Channahon Street
Shorewood, Illinois 60404
Serving clients located in or near:
Joliet, Shorewood, Crest Hill, Romeoville, Plainfield, Naperville, Minooka, Braidwood, Minooka, Manhattan, Lockport, Bolingbrook, Rockdale, Wilmington, Braidwood and all of Will County, Illinois.
DuPage and Kane County
2135 City Gate Lane, Suite 300
Naperville, Illinois 60563
Our Naperville Law Office is located near Naperville, Plainfield, Aurora, North Aurora, Oswego, Bolingbrook, Romeoville, Crest Hill, Wilmington, Braidwood, Lisle, Batavia, Wheaton, Lombard, Downers Grove, Geneva, St. Charles, and many other areas in Will, DuPage, Kane, and Kendall Counties.
Yorkville and Kendall County
1905 Marketview Drive, Suite 268
Yorkville, Illinois 60560
Our Yorkville and Kendall County Office proudly services Yorkville, Plano, Newark, Plattville, Joliet, Aurora, Montgomery, Minooka, Oswego, Sandwich, Sugar Grove, and Bristol and all of Kendall County.