What could be easier than transferring your family business to its natural successor: your heirs apparent, your offspring? If some of your first guesses were peace in the Middle East, increasing honestly in politics, or convincing a teenager that he or she might be wrong about something, you have probably witnesses your share of family-business transfer disasters.
Statistics widely quoted by Estate Planning writers indicate that ‘only’ one-third of all family-owned businesses are passed on to the second generation, and ‘only’ 10% of family-owned businesses are transferred to a third generation. Experience indicates that those statistics are widely optimistic and overstated.
Pessimism notwithstanding, some family businesses are indeed successfully transferred to younger generations. For the transfer of business ownership and control from parent to child to be deemed ‘ successful,’ the parents must achieve all their exit objectives, including the following:
- Financial independence and security completely divorces from reliance on cash flow from the business.
- Intra-family fairness regarding the distribution of family wealth and business
- Complete transfer of business operation and ownership control to the younger generation. This usually means the parent is out of the business and is not needed in the business for any reason. Succesfull-Transfer-of-the-Family-Business