Family Business and The Art of Letting Go

Family Business Welsh LawElsewhere on this website you’ve seen articles relative to the succession issues of a family business.

Recently (Thursday, October 11, 2012), the Toronto Star featured an article addressing small businesses. The caption was “The Art of Letting Go”. The article reported that the Bank of Montreal, in a recent study, found 37% of small business owners having some form of a succession plan, up from just 15% just 2 years ago.

Essentially, there seem to be 3 alternatives: selling the business to a family member; selling to employees of the business; or potentially selling to third parties, whether competitors or an investor.

In all cases, the work required within a family to achieve that succession involves serious and often contentious considerations of what is best for the entire family. It is not and should not be an assumption that the immediate offspring of the originator of the business will step in to continue the enterprise for generations to come. The statistics clearly indicate that family enterprises do not generally succeed to the 2nd generation or less frequently to the 3rd generation. What is in the best interests of the family as a whole ought to be the driving force in consideration of what to do with the patriarch’s efforts.

As the article suggested, “while keeping a family business in the family doesn’t work for everyone” it is, in most instances, the preferred avenue. But finding the right mix among family members of their skills and interests to say nothing of their actual capabilities is no easy assignment.

Quite aside from resolving that the family enterprise should devolve onto the next generation are the legal and accounting as well as taxation issues to achieve that lofty objective.

As the Toronto Star report suggested (and its suggestions have been reported elsewhere), the exercise in succession planning requires incredible inter-personal delicacy and some old-fashioned, hard decision making.

We have encountered these issues innumerable times and offer our services to be of assistance.

Please contact us if you are considering embarking upon this extremely treacherous course.

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