Family Business Succession: More Than Meets The Eye

Mistaking Ownership Transfer for Succession Planning

When it comes to business succession, most advisors laser focus on the technical aspects such as tax minimization strategies; buy-sell, pre-nuptial and shareholders agreements; family partnerships and LLCs; and gifts/sales to irrevocable grantor trusts.  This is hardly surprising since current owners almost always seek out advice first from their long time accountants and lawyers, professionals trained as technical content experts and counselors.  The unfortunate result is a wildly lopsided approach in advice, causing families to believe that what qualifies as succession planning is the act of passing ownership of family business stock, partnership, or member interests through elaborate tax savings strategies to younger generations (or to trusts for their benefit).  Nothing could be further from the reality.

Transfer of legal title to ownership of assets is just one element of the entire business succession picture and doing this alone largely discounts the significance of the family’s heavy handed influence in the business, felt not only by its owners but also the business employees responsible for managing it.  What’s more, succession plans have a direct impact on rising generation family members (who may yet to be owners or employed by the business) but have a stake in the game on day one merely by bloodline.