Your business may be your most valuable piece of property and also your primary source of income. Maybe you started the business yourself, or perhaps you inherited it from your parents. Now that you are starting to think about retirement, you would like for one of your children to take over the family business.
Of course, such transitions are often complicated. There are certain steps that you can take that will improve the chances of continued business success after you transition to ownership by one of your children.
Be honest with yourself and demand honesty from your child
Some parents have a hard time accepting that their children simply do not possess the necessary qualities to run a business or even work as a manager. Even the smartest and best-organized individuals could struggle with running a business if they aren’t confident in social situations or struggle to assert themselves when they hold a position of authority.
Not only will you need to carefully evaluate the situation to see if your child can do the job, but you need to talk with them about it as well. If they don’t feel passionate about the business or driven to help keep it successful, they may not be the best person to take over.
Address the legal matter of ownership transfer
Depending on the structure of your business, you may need approval from other people to transfer your ownership interest to someone else. Even if you are the sole owner, you may have to be cautious about how you change the owner of the business so that you don’t trigger major taxes. Whether you want the transfer to occur now while you were still alive or after your death, you need to have the appropriate paperwork in place long before the transfer should occur.
Commit to transition support and training
If you had to hire an outside professional to take over the company, you would likely provide a succession plan. You would describe exactly how you do your job and what training the person taking over for you will require.
Putting that information in writing and starting to provide the training that your child needs now is important. It is also valuable for you to commit to staying on after they take on their new role and provide hands-on training for the foreseeable future after the transition. Most people find that six months to a year is an appropriate overlap when training their successor.
Addressing common issues that take place when changing business ownership can help you turn your business into a powerful intergenerational legacy.