530-242-6025
Law Office of DeAnne E. Parker
Redding Probate, Trusts, Estate Planning And Business Attorney

Why is estate planning so important for business owners?

Northern California is the home to many family businesses. While it is good when these businesses can turn a profit long enough to support one generation, it is a real point of pride when they get passed down through two or more generations.

The reason it is a point of honor when one generation successfully hands off a business to the next generation is that it happens rarely. Fewer than 1 out of 3 businesses actually survive one generational transfer, and only 3% last down to the fourth generation of family owners.

It take more than just good business skills and ability to adjust to changing times and markets to make a business survive for generations. It also takes careful estate planning, as many businesses have been torn apart in the midst of conflict between family members after a key owner or manager passes away.

It is interesting, then, that while business succession has been listed as the top concern among the leadership in family businesses, a surprising number of executives in these firms have relatively meager estate plans.

Over 31% have no estate plan beyond a simple will, even though simple wills are often inadequate to handle a business transition. Additionally, fewer than 40% have formal arrangements for the transfer of stock, either upon a family member's death or otherwise.

Business succession planning is absolutely critical if a businessowner has a real desire to pass his or her enterprise down to the next generation. While succession planning requires a number of steps, forming a solid estate plan with the help of experienced legal counsel is an important part of the process.

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