Family businesses meant to last forever are best served by having plans in place outlining how the current ownership hopes things will be run in the future. When succession planning and other contingencies are mapped out ahead of time, a family-owned small business can be more easily transitioned when the current ownership retires.
In Pennsylvania, planning for a business’s succession involves several legal matters. Issues to consider include taxes, business-entity filings, and a traditional estate plan such as a will or trust. There are various options when structuring a business and setting up its legal filings so that an owner can retire comfortably and be assured that their enterprise will remain in good hands.
However, according to a 2016 nationwide survey conducted by The Harris Poll, three out of five small businesses do not have an exit strategy. Without a solid exit strategy, a business owner’s retirement or untimely death can cause all kinds of confusion and affect the business’s long-standing reputation in the local community.
Lacking a proper legal and succession structure, a small family business could be swept up in a struggle between heirs, creditors, and tax authorities. Strategies for reducing inheritance taxes and other liabilities should be considered ahead of time so that any heirs choosing to take over the business can mitigate costs and protect the company’s assets.
In addition to the legal requirements needed for a business to remain active, the current ownership should consider the possibility that their heirs may not want to continue running the family business. The law does not require an owner to list a successor in their estate plan, but if a proper successor has not been named, a family-owned business can end up in the hands of creditors or heirs who have no understanding of what to do with it. Good succession planning is important for not only your heirs, but also your enterprise’s customers, vendors and employees.
Whatever your particular circumstances, Feldstein Grinberg Lang & McKee, P.C. can help you take steps to ensure your family business is ready to make the transition in leadership and thrive when another person takes over your company’s helm. Call 412-471-0677 or contact us online to see how we can ensure your business’s continuing success.