Family Business Succession Planning

Welsh Law Family Business Succession PlanningThe majority of all businesses in Canada are family owned.  Yet, surprisingly, according to the Canadian Association of Family Enterprises, 70% of family businesses do not make it to the 2nd generation and an astonishing 90% do not make it to the 3rd generation.

The largest asset of most families is their business and an appropriate succession plan to preserve that asset is self-evident.

Family business succession planning is not restricted to the preparation of Wills or Powers of Attorney.  On the contrary, while those are part of the process to successfully transfer a family business, a much more significant issue is the identification of the appropriate Senior Management to perpetuate the family business.

Two or three centuries ago, when life expectancies were two-thirds or less of what they are today, “Johnson & Son” meant a father and son business, but the father expired in what is today middle age and son assumed the mantle often times in his early twenties.  With current life expectancies, the patriarch may remain vibrant and fully participatory well into his 80’s or even 90’s and the “Son” may well have toiled in the family business into his 50’s or 60’s.

The planning of succession is probably the last and least desirable part of the operation of a family business.  It presents tremendous potential family conflicts and sometimes divergent views on the future of the business and its requirements.

Skillful management of these family dynamics, a critical review of the business prospects and an even more sensitive assessment of skillsets and commitment often require the resources of an independent third party to assist the family.

In our office, we have significant experience with family-owned businesses migrating from one generation to the next.  The use of independent resources to assist the legal process may be called upon, but throughout the process the primary objective is to maximize the capital invested in the family-owned business, avoid or defer unnecessary taxes and to satisfy the aspirations of the family as a whole.

We look forward to assisting in this sometimes incredibly difficult recognition of the reality associated with the necessary consideration of a family business succession.

 

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