Imagine that you have two children. For decades, you have run a family business. It is your pride and joy, not to mention your main source of income. You want to pass that business on to one of your kids when you pass away.
Your first child is smart and well-educated, but they lack dedication. They’re more interested in pursuing hobbies and enjoying life. While you don’t feel like that’s a mistake, per se, it does make you think that child is not the ideal person to run your business. They simply won’t have the drive and won’t put in the hours.
The second child, however, is very goal-oriented and task-oriented. They worked far harder at their studies and they pay attention to the little details. You think they would be the perfect person to run the company.
The family dynamic
If you were simply hiring a new person to run the company, it would be easy to make your decision. You’d pick the second child, give them the job and move on with your life. There’s no question.
But you’re not hiring someone. You’re leaving a significant family asset to a child. That makes your decision far more difficult. If you pick one child, is the other going to see that as unfair favoritism? In some senses, that’s exactly what it is: You do favor one child over the other for this specific job.
As you can see, it may not be easy to pick who gets the business. This is why succession planning is so hard. You have a few options:
- You can put the company first and leave it to the child who would be best at running it.
- You can put your family first and leave it to both children equally.
- You can ask your children who wants the company and honor their wishes, regardless of what you think would be best.
- You can avoid the whole thing by selling the company to a third party and then splitting up the proceeds between your children.
- You can put it off and hope that your kids sort it out on their own.
This last decision is not wise. It’s not good for you or your family. It’s not good for the business.
Even so, that’s what a lot of small business owners do. They don’t make a solid plan and they create a problematic situation that is likely to cause an estate dispute.
Getting through disputes
If you want to plan successfully to avoid a dispute, you need to know what steps to take in advance. If you’re already involved in a dispute due to poor planning, you need to know your rights and how to get through this process.