If have grown your family business and your children are at an age where they can work for you, and that they are interested in taking over the business, you'll have to start figuring out how you want to do your succession. Sitting down with a legal professional can help you determine how to sort things out. Here are a few things you want to ask your lawyer about.
Gift or Sell Shares
As the owner you have the option to gift or sell the company that you own. You can choose to gift each child the same amount of shares or an amount based on how much they contribute to the business. You can also decide to sell the shares to those that want to buy into the company, and leave out those children that don't want to buy you out.
Business Financing or Early Saving
For those that are interested in owning the company and they want to buy or be gifted shares, financing has to be arranged. Here are a few ways you could help them get the process started:
- Deduct a certain amount from their pay each week and have it put in an investment account
- Start working towards securing a loan for the shares to be bought from you
- Allow the children to use trusts or distributions to pay for the business
Your lawyer can help you determine what is the most practical. Starting to save at a young age may make buying the business much easier later on, and financing with a bank you already use may increase the chances of your kids getting approved for the loan.
The value of your business is most likely going to increase over time. If you are making deals and changing things around now, make sure that the price your children have to pay is determined by the worth of the value at that time, not the value now. That is your money and retirement income, so it's important to get everything you can.
If you know that you want your business to stay in the family and you aren't sure how you want to get started with the family business succession planning, a lawyer can go over your legal options with you to figure what the most likely options are. You can set everything up so there are no fights between siblings, and to avoid any potential controversy.