For many people, their legacy will involve either what they do in their professional lives or what they do in their personal lives. For a small number of individuals, those two legacies may eventually overlap.
If you have created or at least managed the family business through most of your adult life, you likely have an intense sense of pride stemming from the success and growth of that business. You want to pass the business on to someone you love so that your business can provide for your family in the future and your family can know the joy that comes from running a successful company.
However, just leaving a line in your will that you want your child to inherit the business may not be enough to protect their potential ownership interest in the company or the company itself. You need to have a more careful approach to the succession of the business as it passes to your child.
Make sure your child is capable and willing to run the business
It may seem like common sense, but many parents are so intensely involved in the company they developed that they can’t see their child’s perspective on the business. Don’t just assume that your child wants to follow in your footsteps and take over the family company. They may have dreams of their own that have nothing to do with the industry in which your business operates.
Even if your child wants to embrace a role with the company, you need to make sure that you know they are capable of fulfilling it. No matter how much you love your child, they may not be organized or good enough at managing people to run the company successfully. You don’t want to set your business or your child up for failure.
Having your child shadow you at work or delegating more responsibility to them if they already work for the company can be a good way to determine if they will ever be capable of fulfilling the role you do for the business. If they are a good fit, make sure you take the right legal measures, such as the transfer of stock, to pass your ownership interest to your child.
Make sure your child knows what managing the business involves
Once you have taken the legal steps necessary to ensure the transfer of business ownership or management to your child and verified that your child is both willing and capable of performing the duties you do for the company, you then need to make sure that those duties are outlined somewhere in a straightforward fashion.
Executives and business owners often don’t stop to think about all the information that only they know or have access to that could impact daily operations for the company. From a list of all of your bank accounts and various debts, to website passwords and instructions on the weekly, monthly, quarterly and annual responsibilities that you perform, it is critical that you document what you do for the company. This is the only way to ensure that someone else, whether it is your child or not, can eventually step into that role.