When considering the future of a family owned business we strongly recommend documenting a family succession plan.
A family succession plan is an agreement between all family members, that provides for how the assets are to be distributed between the children or successive generations. The transition to the next generation can be highly emotional, but if done correctly with a family succession plan, it can be successful and leave all family members happy with the process.
There are a number of competing interests that must be taken into consideration, such as:
- What is a fair value for the property?
- If it is a gift, how the older generation will continue to be financially supported in their retirement?
- If it is a purchase will the debt be at a serviceable level?
- How will each family member be reimbursed and what responsibilities will they have?
- What is fair and equitable for both working and non-working members of the family?
Importantly this must all be documented in such a way that each party is bound to the terms and cannot change elements of it later. If you have a family owned business and are considering your succession planning, contact Clifford Gouldson Lawyers for expert advice that may make the difference in ensuring a smooth transition to the next generation.