Recent News

Keeping a Family a Family and a Business a Business

Posted in ,   |  May 24, 2016

Thompson Law logoBy: Carolyn A. Thompson, Founder Thompson Law, PC, Sioux Falls, SD

Every prudent business family should schedule a consultation with a good business succession lawyer so that they can begin discussions on how to keep their family a family and their business a business. Waiting until they “have time,” or “have it all figured out,” is like that overdue vacation that never gets scheduled, and there is a lot more at stake than missing out on some fun in the sun.

DOING IT WRONG

Many family businesses wait until the point of nearly breaking before they schedule a time to discuss what is a logical plan of succession. Sometimes they come in after there has been months and years of uncertainty, upset expectations in terms of compensation, work expectations, ownership transition, and the list can go on. For many business owners, it is easier to just do what they know and are successful at: their business, rather than address issues that are festering. Most people would agree it is necessary to do proper maintenance on your car, machinery, equipment. You don’t want to keep using and abusing the very things you need to function in life and in business. The same goes for relationships. You know it in your marriage, your friendships and you should know it in your family business.

DOING IT RIGHT

Set aside a few days a year, or a day each quarter to work with your planning team on what is the proper succession plan given where you are at in business. You don’t have to obligate yourself to transferring ownership too soon, but do begin the thought process. Your planning team is typically led by an estate planning and business succession lawyer. Your certified public accountant, financial planner and insurance specialist are also vital to the team. The succession conversation could originate with any member of the planning team but should not go too far without all the players involved, if necessary.

SUCCESS PRINCIPLES

In the initial stages of discussion the owners of the company are usually consulting privately with the attorney, but again there could be circumstances where the CPA or another planning team member work on the initial plan design. The attorney client privilege provides the confidential forum for the owners to be very open about what they hope for, what they are afraid of. If the owners personally engage the attorney (as opposed to the business entity hiring the attorney) the consultations are confidential. If the business entity hires the attorney, and there are multiple shareholders, the conversations with the attorney can potentially be discovered by any of the shareholders.

COMMON MISTAKE

Many business owners think they have to have their business succession plan in place before they do their estate plan. Nothing could be further from the truth. If you die without an estate plan and without a business succession plan you have a messy estate and uncertainty in the business. If you die with an estate plan and without a business succession plan you have much less of a mess. Also, in the initial stages of planning, when you are still figuring out who, when and how the business will transfer you can include options within your estate plan that are revocable — so you can change them as your business succession plan becomes more clear to you.

WHERE TO BEGIN

It all begins with a phone call. Schedule that conversation with your planning team or a key member of your team. Don’t worry so much about having it “all figured out,” that is what the team is for, to help you figure it out. Once the meeting is on the calendar, the process will begin and you will be better for it. I don’t know about you, but whenever I have tickets booked and vacation scheduled I suddenly become much more focused on the tasks at hand. What could be more important than your family and your business? Make the time to ensure your family remains a family and your business remains a business.

For our Prairie Family Business Members, the Family Retreat at Paul Nelson Farms is going to offer an excellent opportunity to really dig deep and begin implementation of key principles to help you, your family and your business maintain the key communications, relationships and plans for success. Reach out today by calling (605) 367-5936 to learn more about the Family Retreat and reserve your spot.

Carolyn A. Thompson is the founder of Thompson Law, PC, an estate and business planning legal services firm in Sioux Falls, SD. Her practice focuses on agricultural estate planning and business planning. She is a member of the American Estate Planning Attorneys, an exclusive national organization dedicated to estate planning attorneys. She is a member of many other organizations and has been practicing law for 20 years and is now licensed in SD, ND, MN and IA.

Scroll to Top