Page 33 - GBC spring 2018 eng

It’s A
Family
Affair
Succession Advice Your Accountant and Lawyer Won’t Tell You
THE NON-TECHNICAL COMPONENT
Research shows that too much attention is being paid to the technical aspects of the succession plan, such as the estate freeze, business valua- tion, tax minimization, trusts and wills while too little attention is being paid to the non-technical component such as family communication, family values, family dynamics and family expectations.
The focus on the technical component is easily explained, since family business owners tend to turn to their accountants and lawyers when it comes to their succession plan. Those professionals are not trained to deal with the type of issues the family component may face, such as:
• Is working and owning the business a birthright or an opportunity that
needs to be earned by family members?
• Who can work in the business and are there any educational or other
requirements (i.e., outside work experience)?
• Who can own shares of the business, when are the shares transferred
and how is the transfer funded?
• Should the shares be split equally amongst the children even if they
don’t all work in the business?
• What happens in case of death, incapacity or voluntary exit of a share-
holder?
R
ecent research demonstrates that although most owners would like to transition their business to the next genera- tion, 67% don’t make it to the 2nd generation and 88% don’t make it to the 3rd generation.1
These statistics are alarm- ing, however the research has also identi ed what is going wrong and how to x it. With the proper tools and processes, family business owners can give their family business a greater likelihood of success.
1 Ernesto J. Poza and Mary S. Daugherty, Family Business, 4th Edition, South Western Cengage Learning: 2014, viii.
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