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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