As a small business owner, you know how many years of hard work you’ve invested in building your business from scratch. At one time, your business was just a dream in your head. Now, it’s become a valuable asset that you’re like to pass on to your children.
But handing down a small business from one family member to another without experiencing a bunch of hiccups along the way is tricky.
Here is a guide to successfully passing the business torch to your children….
Decide on the Arrangement
There are a few different ways to transfer your business interest to your children. One of them will be more suitable to your retirement plans than the others.
Here are some to consider:
- They run the day-to-day ops, but you retain ownership and final say. This option is often used as a transitional phase for owners whose ultimate goal is to be hands off, but first want to be sure their children won’t run the business into the ground;
- They take over ownership and run the day-to-day, but you take a salary as consultant, plus a percentage of profits. This arrangement is best for those who trust their kids for the most part to take care of the biz, and who need the extra income from the consultant role and profit sharing;
- They take over complete ownership, and you sign over all future rights. This is great for people who want to retire completely, and never want to think about their business again.
Use a Lawyer
Verbal agreements rarely work out among family members. To avoid a future game of he said, she said, use a business contract lawyer to draw up the paperwork passing along the family business. Whatever it costs, it’s worth it.
Formal papers will help avoid family arguments, as well any ambiguities in ownership or tax liabilities that the government might bring up.
As the following article looks at, it will also provide a written record for your descendants as to where things come from in your family line.
It will be interesting and valuable for your great grandchildren to understand that you built the family empire during your lifetime.
Make Peace with Your Decision
It may be hard to believe after all the family talks, and the meetings with the lawyers, but the hard part is yet to come. The hard part is making peace with your decision.
Having built your business from the ground up, it can be hard to hand over what you make think of another child, to someone else.
In addition, breaking old habits like getting up and going into work every day can be more challenging than you think.
But if you really want your children to grow your business even bigger, and bring it into the future, you need to give them the freedom to be in charge, just like you promised.
Allow them to make mistakes without judging them. Keep your opinions to yourself unless they ask for help.
When you show that you trust them to keep your family business safe, your family’s bonds will be stronger than ever before.
About the Author: Kate Supino writes extensively about best business practices.