A big problem with a family owned business is when is it the best time to pass the torch. There are two problems one being is the founder ready to give it up. Or is it too early to give it up.
A goal with all entrepreneurs is to retire with a nice monthly retirement check and leave a legacy for the family Northwest Embroidery has this problem and we want to share some thoughts.
70% of all business do not survive the second generation. Passing the torch is not easy. The question looms as to who will get handed the torch. Is the person selected capable and will there be a fight in the family. Factually 70% of all businesses flame out with the next generation. The percentage is very scary when there is a big legacy involved.
Before these questions are answered there has to be estate planning regardless who takes over. The method of transfer has to be in place before the founder rides that mythical black camel into the desert.
The most important is to have a will. Without a will everything can be lost or divided by a stranger. No matter how bad the will is it must be done before exit time. Probate can be very ugly and messy.
Transferring assets before death
The easiest before decision time is to transfer assets either by gift or sale. This should be done and everyone knows who is getting what part of the business or estate.
Stock is the easiest to transfer because the value is subjective. Another easy move is to put everything possible into a joint account. The objective is to die broke. But just hope everybody involved can be trusted to wait for the moment of final distribution.
One technique is to set up a LLC corporation with family members as stock holders. This is a relatively easy method to transfer assets and minimize tax liability.
Northwest Embroidery has used some of the ideas listed above in our business planning. We do not want the business to end with a key man death. We pretty much have our legacy in place and now the owner can start to enjoy the fruits of his estate.
This is not legal advice but just putting my thoughts to paper so they can be shared with fellow entrepreneurs.
One good solution is to not get old.