Fall is a great time to plan for the future of your business
As we go into the fall time of the year, we think of kids going back to school and new starts for the kids, businesses looking at their last quarter to achieve their annual results shown in their budgets, and setting goals for the next year that will become part of the 2025 budget for that business.
For those who have a family-owned business, that owner usually gives only a fleeting thought of what happens to the business in the event of that owner’s disability or death. This article addresses the need for a positive plan for the business in the event that the business owner steps aside, or has an unexpected disability or passes away.
Of course, this thought is really about succession planning, but also involves both financial planning and estate planning for that business owner. This business usually is the largest asset the owner has. This issue becomes an even more important topic if the business owner has children or other family members who are involved in the business, and others who are not involved in the business.
Some of the major questions that many such business owners may ask themselves are:
• Of the children or other family members who are involved in the business on a day-to-day basis, are those family members able to step up to eventually take over the job that the business owner has been doing? Are they able to set a vision for five or 10 years forward to give proper direction to the business for its strategic planning? Since many business owners are bringing in the highest revenue sales and customers, are those family members involved in the business capable of selling?
• Does the business owner have other financial assets that bring enough income to support the business owner and their spouse and dependent children to maintain the lifestyle they have so the business does not have to support the business owner and the person who is taking over their job?
• Is the company self-managing at this point in time? Is it managed by people who are outside of the family?
• When does the business owner wish to step aside or retire?
• If the business owner wants to make a gift of shares or an interest in the business to the child involved in the business, are there sufficient other assets to give to the other family members not involved in the business, so that each will get a share of the trust estate that the business owner wants them to have?
• Does the business owner wish to have part of their interest paid for by the child involved in the business, so they have some real stake in the business, rather than just receiving a gift?
• If the honest response to some of the questions listed above is that the family members who are involved in the business will not be capable of running the business successfully, and the business owner needs the funds from the business to support the lifestyles of that owner, their spouse and dependent children, perhaps the owner can consider a sale to certain key employees, or a collaboration with another similar company that gives that company a potential option to buy the company.
These are a few of the questions that need to be thought through. There is no right or wrong answer to the questions listed above. Instead, it requires some self-reflection by the business owner on how that business cannot only survive the calamity of the business owner having to step aside in retirement or involuntarily, but also how the business can thrive without them.
It is difficult to look at these questions, and to have business owners of family-owned businesses really stop what they are doing to reflect on these questions and build out a proper plan for the future of their business. Many such owners cannot imagine the business without that business owner at the helm. If the business owner cannot imagine the business without them, will there be a business left that will survive them without this planning?
• Denice Gierach is an attorney, CPA, Northwestern University business master's graduate, and has owned several businesses, including in real estate and manufacturing. She is the lead attorney at Gierach Law Firm in the Chicago area. With more than 30 years of experience, she has been a respected and sought-after resource for businesses looking to grow, sell, solve problems, and succeed long term. Her insight across business areas gives a fuller lens to business issues and solutions, and helps businesses grow and succeed with less time spent on legal issues and other time-consuming problems.