Creating a business succession plan gives you a chance to think about how the next generation is going to carry on your legacy at the company. Not only do you want what’s best for your family members, who may be taking over that company, but you’re also looking out for what is best for the business itself.
In some cases, business owners decide to split up ownership evenly. They think that it’s only fair that all of their children have the same ownership percentage in the family business. But this may not actually be what is best, either for the family or the company, so it’s important to remember that the succession plan does not have to be equal.
Why are equal shares a problem?
There can be some downsides to leaving equal shares to everyone. For one thing, this means that all of the business owners have to work together to make decisions. If they don’t get along or can’t communicate well, that is significantly going to harm the future of the company. When the owners are constantly having disputes about the direction they should take the business or what decisions they should make, the business cannot function efficiently.
Additionally, it may be that they are not all equally capable of running the business. What if one of your adult children has a business degree and a master’s degree from one of the most prestigious universities in the country, but the other is a high school dropout? Is it really in anyone’s best interests for those two people to own equal shares of the company?
As you make your business succession plan, just take the time to consider all of the necessary legal steps and the options you have.