Taking over a family business that combines two of the most important parts of our lives - family and work - in a potentially volatile process that can affect relationships and maintain the transition from being smooth as could be.
We asked Anna Sergunina , a financial consultant who works with small business and who is also a member of the NerdWallet Ask an Advisor network , the important things to consider when a business is changing hands and the family is involved .
What are key things to keep in mind when taking over a family business?
Be aware of the possibility of tension , which is related to different family members may hold attitudes toward business . When someone owns a business for many years , it can become an extension of who they are - becomes their " baby " .
The new owners could not be so passionate in love and business as the founders were . You could only see the financial possibilities , and this can create tensions in the transition process .
We hope that there was some succession planning in advance , although this can be difficult when it comes to family members . Your current level of involvement in the business affect the acquisition plans . It ' much easier to take charge immediately , for health or other reasons , if you are already working in the sector , for example.
Ideally, the complete transition of the original owner to the new owner has to be gradual, with the new owner becoming more of a presence in time. A gradual transition, well thought ensures that customers do not get scared away, the cash flow remains stable, and the staff and employees are treated fairly.
In case of a financial transition, ideally the new owner would pay for the activity of a period of time - for example, five to seven years. This would allow time for the new owner to come up with the funds, potentially allowing the use of profits by companies to repay any commercial loans needed to take over.
A gradual recovery program also allows both parties to implement a systematic strategy gifting for tax purposes. Parents can gift interests in a business for the year, children in the first year without gift taxes within certain parameters. The annual amount allowed to be provided with tax is $ 14,000 per person, per year. This strategy also allows for the business interest to be removed slowly from the seller's estate, potential portion save on estate taxes.
What other steps should the new owner take?
I recommend that new owners take over your legal professional to help with navigating legal documents . And make sure everything is in writing . This helps to avoid uncomfortable conversations with family members on Thanksgiving dinners , because some may have interpreted a handshake deal so different from the way in which the other party has done . People can change their minds and forget what they said and they decided to , even if they are family members. Having solid legal agreements in place leads to a much smoother process. No one wants to go to court or spend unnecessary legal costs money.
Any other tips related to family businesses?
Know yourself. Understand the strengths and weaknesses . Although the family may wish to take over the company , you are the best person ? What role should you take ? Need additional staff assistance ?
It ' also important to begin to bring the right people to help you build your business according to your vision . Find a good talent is the hardest part . I used the Kolbe personality test in my work to better understand the people I 'm working with . How they can react and respond to certain situations ? How you process information ? They are detail-oriented ? Do not jump into a project or take a little ' time to think ? All these factors are very important to understand how you start to adapt to the existing team and build your own .
