Should I Leave My Business to a Family Member? Part 2
If you are interested in corporate succession planning in Tampa, you should know that there are generally two types of exit strategies business owners utilize when selling their business: retention planning and buy-sell retention planning. Retention planning is essentially when you keep the business within the family and maintain control of the assets. Buy-sell retention planning is when you offer a larger portion of the company to shareholders or a key member of the company.
Whether you are interested in selling your business outright or retaining assets by selling the company to a family member, a business succession planning attorney in Tampa can evaluate your business, review your financial status, create an estate plan for you, and help you determine the right succession plan for your business. In the last section, we featured many of the benefits of leaving your business to a family member. In this section, we will discuss some of the potential pitfalls.
Drawbacks of a Potential Family Business Transfer
Here are some of the reasons why you may not want to sell your business to a family member:
Financial Status: For many business owners, they are relying on the transfer of the business for retirement funds. If you elect to pass a business on to a family member, your family member likely cannot afford to provide you with the full value of your business upfront, which means there is a financial risk if the business isn’t as successful under new management.
No Immediate Sale: Because the finances typically aren’t readily available for a family member interested in buying your business, many owners wait several years for their successor to save up funds and pay them back. However, the longer you wait, the more susceptible you are to liability risks. Of course, selling your business to a third party allows you to maximize the return on your transfer and enjoy retirement.
Family Issues: In many cases, there isn’t a family member prepared to take over control of the company. Sometimes family business transfers can be an emotional process with a lot of friction that results in a divided family. Electing to compromise on co-management of a business may not resolve family problems and can also compromise the company.
Final Things to Consider
If you are considering transferring your business to a family member, it’s important that you make certain that your successor’s vision of the company aligns with your own. Ask yourself, if this person was not related to me, would I consider them qualified to manage the company? At the end of the day, many elements factor into whether or not a family business transfer is right for you.
If you would like to speak with a business succession planning attorney in Tampa, please contact us today.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.