The family business has always played an essential part in the American economy. The Jayson Law Group is proud to assist start-up companies with formation issues and well-established family businesses in New Jersey  In fact, according to statistics compiled by the Small Business Administration for 2011, 90 percent of all businesses in North America are family-based. Furthermore, family businesses account for 62% of all jobs in the United States. In 2003, the national federation of Independent Business found that there were  1.2 million husband and wife teams running companies in the US.

Despite the importance of the American small business, there is often a resistance to thinking about the company after the initial generation has retired or passed on. This is despite the fact that a Cornell University study estimates that, by 2040, approximately $10.4 billion in assets must be transferred to the incoming generation.  Projections about the continued viability of already existing family businesses are grim. One projection prepared by Peak Family Business found that while 70 percent of family business owners would like to keep the business within the family, only about 30 percent will successfully pass the torch. By the third generation the percentage of businesses successfully passed on drops to 12 percent. By the 4^th generation, only 3 percent of family businesses will remain.

Crafting a comprehensive and responsive corporate or company succession plan can improve the likelihood that the company you toiled to build will  continue to provide for your loved ones through the next generation. The Jayson Law Group’s experienced business and commercial attorneys can help you identify areas of concern and address these issues before they become insurmountable.

Identifying the key issues and potential grounds for disputes

If the first step in protecting and preserving your business for the next generation is recognizing that business succession will not just happen on its own, the second step is identifying the areas of concern. While there is always at least some level of differing interests between incoming and outgoing management, the difference can be particularly pronounced in inter-generational successions. Essentially, family interests of the incoming and outgoing generations must be aligned. Clearly this can be difficult when the outgoing generation is looking to the company for retirement, while the next generation may wish to preserve flexibility or to take the business in a new direction.

These interests must be accounted for and aligned. Failure to do so opens the door to intrafamily disputes, hostile takeovers, and the failure of the company.

Further steps to drafting a family business succession plan

Once you have identified the potential stumbling blocks and the goals for your business succession plan, the next step is to establish a decision-making process that will govern this, and other, disputes. This method for resolving disputes should be memorialized in writing.

At the next step, it is time to establish the actual succession plan. Working with an experienced attorney can help you ensure that the plan is comprehensive and covers all foreseeable concerns. Some essential elements of the plan will include:

• The identification of successors. The owners, shareholders or members of the company should be identified. Likewise, those responsible for day-to-day operations should be included in this plan.
• All family members should be identified. Their role should be noted and whether they are active or inactive in the management and administration of the company should also be noted.
• Consideration of the tax impacts the sale or transfer of the business may have.
• Consideration of how divorce, or death may affect the business.
• Identification of needs the succeeding owner or manager will have.
• Creation of a buy/sell agreement that is fair, accounts for family member needs, and that does not incur unnecessary taxation.

Aside from these steps, creating or reviewing an estate plan for both the outgoing and incoming members can increase the likelihood that the agreement will be comprehensive and cover all foreseeable succession concerns.

Rely on the Jayson Law Group when it comes to passing your closely held business to the next generation

Addressing common business concerns before the death or retirement of a company owner or manager can increase the likelihood that the business will survive for the next generation. For a free and confidential initial consultation, call the Jayson Law Group at 908-768-3633 or contact us online. We are dedicated small business lawyers.