Newspaper article St Louis Post-Dispatch (MO)

Family Business Plan a Good Idea

Newspaper article St Louis Post-Dispatch (MO)

Family Business Plan a Good Idea

Article excerpt

Q. After World War I, my grandfather started a small manufacturing business that has been quite successful. When my grandfather died, he left the business to his only son, my father.

Now my father is getting older and can't really cope with business decisions but insists on trying anyway. My sister and I both work in the business, though the two of us don't agree on much. I say Dad should retire and pick one of us to run things but my sister thinks Dad should continue. Any suggestions?

A. Your family needs a plan for continuation of the family business. Many family businesses don't survive to the second generation, let alone the third as you are hoping. A business continuation plan, or succession plan, is best created early in the life of the business, but it's never too late and the sooner the better.

Your business succession plan needs to address many issues including the following:

A plan for selecting and training the future manager of the business. The manager might be you or your sister, or perhaps a team of the two of you and one or more key employees who are knowledgeable in the business.

Sometimes an outside consultant is brought in to manage the company or at least to ease the transition from the parent to the successor manager or management team. Often it's hard for a parent to pick one of his children over the other, and that's where an outside, objective consultant may help.

A plan for future ownership of the company. Most likely, the business is a large part of the value of your dad's estate, and he probably wants all of his children to share in the benefits. But should all the children own a part of the company in equal shares? Some but not all of the children may have put in a lot of "sweat equity" to increase the value of the business, and that has to be factored in, too.

Perhaps the succession plan needs to include a method for the children who have helped build the company to buy out siblings who haven't worked in the business. …

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