Everyone has a reason why they start a business. For many, it is impact or lifestyle. But for some, it is the opportunity to create something that will be passed to future generations. Legacy builders don’t just want to create impact for their generation or a lifestyle for themselves, they want to build something that keeps on giving to both their family and communities. If that is your goal, you will need to consider more than just profitability and strong business systems in place to make sure it stays in your family. Just as you will have a marketing plan, financial plan or business plan, there are documents you need to make sure are in place to keep the company in the family.
You will need to make sure you have the right business structure from the beginning. That means you will need a governing document that lays out:
- Each person’s percentage/share of ownership
- Each person’s share of profits (or losses)
- The rights and responsibilities of each owner as well as restrictions or limitations on tranferability
You will also need a clearly defined managerial structure and procedure for decision-making about the business.
There will need to be an agreement on the inevitable transfer of power. The clarification needs to be made that “in the family” doesn’t always mean “only family”. Your succession plan may need to include other professionals in decision making roles that are more skilled in areas of marketing, accounting or even legal.
Checklist as Transfer Takes Place
Once you have all the “who” sorted out, you need to decide on the “why”, “when” and “how”. These are all straight-forward and practical decisions. By having a checklist and guidelines, you can prevent the “heated discussions” that could be a part of family dynamics.
If you are making plans to leave a business legacy for your family, make sure you talk with your legal counsel now. If you have further questions, we would be happy to assist you and your family.