Want Your Small Biz to Stay in the Family? Follow These 3 Tips
Some are looking to change the world. Others are just looking for a quick buck. Then again, some entrepreneurs start their own business to create a legacy that could remain in their family for generations. And if that's your goal, you may have figured out already that it's not as easy as it sounds.
Let's say you've cleared the obvious hurdle of keeping a business profitable and built for long-term success. How to you make sure that business stays in the family?
1. Do Family Businesses Need an Operating Agreement?
You'll need the right business structure from the outset. And that means having an operating agreement that lays out:
- Each person's percentage ownership share of the business;
- Each owner's share of profits (or losses);
- The rights and responsibilities of the owners; and
- What will happen to the small business if one of the owners leaves and who will inherit which roles if no one does.
You'll also want to clearly define the managerial structure and procedures for business decision-making about the business, and you'll need the all-important succession plan.
2. Do You Have a Family Business Succession Plan?
Keeping a family business in the family doesn't happen automatically -- you need a plan. That should include getting everyone in the family on the same page with the inevitable transfer of power. And "in the family" doesn't necessarily mean "only family" -- an experienced team of professionals, from marketing to accounting to, yes, attorneys, can make the transition a smooth one.
3. Checklist for Transferring Your Business to Your Kids
You may have the "who" all sorted out. But you'll still need to decide on "why", "when", and "how." And, of course, all of those (except maybe the why) are practical decisions, not personal ones. You probably don't need to be reminded that families and family relationships can be volatile, especially when money is involved.
If you need help ensuring your family succession plan actually succeeds, talk with an experienced business attorney.
- Find Business Organizations Lawyers Near You (FindLaw's Lawyer Directory)
- Top 5 Legal Tips for Managing Family Members in Your Small Business (FindLaw's Free Enterprise)
- Succession Plans & the Small Family Business (FindLaw's Free Enterprise)
- 3 Estate-Planning Tips for Entrepreneurs (FindLaw's Free Enterprise)
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.