Who is Going to Take Care of the Family Business
Make sure your business stays where you want it to
Family owned businesses in Canada and the United States have comprised a major portion of the job market and economy for decades. What does the future hold for North American family owned businesses? As the population ages and the beginning phase of a large population of Northern Americans begins to retire, what will the face of the future business economy look like?
Family business succession planning is essential to the employment market and economy of both Canada and the United States. The next two decades will see many North American family owned businesses being listed for sale or passed along to family members to run the family operation. All too often we hear reports on the decline of a family owned business once it has been passed on to the children. Sometimes the failure relates to the new family CEO not understanding the passion and commitment that must be present to succeed in business. Succession planning is critical to the stability and financial security of any business as the present day CEO retires, sells or passes on the business to a family member.
Many CEOs of family owned businesses have a personal interest in seeing the company remain owned and managed by the family. This requires planning and careful consideration to ensure that the family can maintain the company and additionally the family legacy. Likewise, this plan is critical to ensure that the founding owner can achieve the necessary personal financial security to enjoy retirement. Lack of planning can result in the loss of retirement, financial security, loss of the family legacy. In addition, without a plan, the possibility exists that estate tax or gift taxing could be incurred if the business is inappropriately transferred to a family member. An ESOP (Employee Share Ownership Plan) can help to ensure the continued viability of the corporation following the retirement of its current management.
A well design ESOP clearly defines the objectives for the succession plan. An ESOP may include some of these key factors: how to attract and maintain the necessary skilled employees, how to outline long term corporate goals, and how to involve employees in stock ownership and other incentive plans. Employee ownership usually carries the additional benefit of higher employee motivation and morale, a vital component that all corporations need in today’s business economy.
Succession planning following the parameters of a well-designed ESOP, may just be the answer to keeping the dream alive and in the family.
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