Starting and growing a family business takes years of dedication, hard work and financial resources. Without an estate plan addressing the issue of business succession, your spouse or children may inherit the company under Oregon’s default probate law. This may seem reasonable, but if your heirs are not interested in managing the family business, your existing customers may suffer.
When families include business succession as part of their estate planning strategy, it allows consideration for the company’s future. A period of training may need to take place to ensure that the chosen heirs understand the ins-and-outs of running the business. Learning how to manage clients, vendors and suppliers may take time because new business relationships may need nurturing.
Depending on the type of products or services offered, succession may require your heirs to take on some day-to-day involvement with the company ahead of time. As reported by Forbes magazine, it could take 10 years to work through the issues involved in transitioning the business to your heirs. Your business may need a new form of ownership and restructuring for your estate planning to meet its tax objectives.
Nearly 57% of the family businesses surveyed by the National Bureau of Economic Research Family Business Alliance claimed to have created a formalized succession plan. About 25% of the owners stated that they simply planned on their heirs taking ownership of the family business.
In a survey conducted by PricewaterhouseCoopers, only half of the business owners disclosed that their business would transfer to their heirs or family members. It appears that an increasing number of members of the younger generations do not have a genuine interest in taking over a family business. Understanding how your heirs may want to either manage or sell your business may help in deciding on who should take ownership of it.