Planning is vital when it comes to the future of a family business.
Brooke Borg, founder and attorney at Borg Law Group in Summerlin, said family businesses must seek out guidance to build their business and estate plans.
“As someone who founded my firm, if I want to pass it on to the second generation, but I don’t properly plan for that, issues will arise,” she said. “Things can get sticky if there isn’t proper planning.”
Borg also said family businesses should consult an attorney that practices in both business and estate planning or have one for each. “If you have one for each, make sure they consult each other to make sure the plans work together,” she said.
The will and trust, Borg said, are the cornerstone documents of estate planning, and they need to convey the same message when it comes to what happens to the business after the owner passes away.
“The hard discussion we have to have with our clients is what the plan is for the business after the owner passes away,” she said. “It’s important to get all the family members in the same room and make sure they’re all on the same page as far as what happens with the business.”
According to Borg, most family businesses have a desire to pass the business onto the next generation. When younger generations are brought into the business, she said, it’s best to make a gradual transition instead of a radical one.
“Sometimes the business won’t survive if you make a drastic transition in ownership,” she said. “When everyone has time to get to know the person, it will be a lot smoother.”
Borg added that family businesses should plan early and revisit their plan at least once a year.
“You’re never too young to plan so seek advice from professionals around you,” she advises. “Plan early and often.”
Doug Edwards, managing partner at Edwards &Chambers LLP in Las Vegas and former adjunct professor at Boyd School of Law at the University of Nevada, Las Vegas, said family businesses should find a corporate individual or someone who is knowledgeable about their family to mediate crisis situations such as death or divorce.
“It’s important to trust someone to make decisions when situations arise or when you’re no longer around because power can affect relationships with other family members,” he said.
Like Borg, Edwards said family businesses should sit down together at least once a year to look over their estate plan and talk about anything that’s impacting the business.
“As many of my clients get older, they have what’s going to happen to their business on their minds more so it’s not unusual to have them talk to me two or three times a year,” he said.
Family businesses, Edwards said, differ from regular businesses and should be handled with care.
“The main thing between your average business and a family business is the human element is much more of a factor and problems at home end up affecting the business,” he said. “Trust is the main vehicle for handling the care and feeding of a family business.”