There are nearly 400,000 business firms in Harris County, Texas, according to U.S. Census Bureau statistics. A firm may operate more than one business location, such as a chain of restaurants, or may mean an individual such as a self-employed salesperson. If even half of these Texas entities are family-owned, that means a lot of Texans work with family members.
If you own a family-run business, it is important to do some thinking about how you want your business to evolve. A primary concern should be succession planning. For a number of reasons, too many people put off setting up a succession plan until it is too late. Some of the procrastination is based on one of the following myths.
Your business will last forever
According to information compiled by the University of Vermont, the average life span of a family business is 24 years. Less than half of such businesses pass on to the second generation and only 13 percent successfully transfer to a third. Less than a handful of family-owned businesses remain until the fourth generation or beyond.
It will be easy to sell
Even if you do not intend that your business will continue after your retirement, do not assume that it will be easy to sell. Finding a buyer who is ready, willing and able to purchase your business for the price and terms you want can be quite difficult. Accurate valuation of the assets, goodwill, income and other factors is often based on timing, compulsion and proper documentation.
Your successors will get along
Sibling rivalry and family discord are common, especially when family members work closely together. Earlier this year, a multi-million dollar lawsuit was resolved – after multiple appeals – in favor of an ousted brother. A family-owned hydraulic brake business passed on to two brothers after their father died. Various family members and remaining executives collectively conspired to remove one of the brothers from the company. After years of litigation, family unity was completely destroyed and the wrongfully terminated brother received more than $20 million for his losses.
There is plenty of time
An accident or illness can quickly derail business plans and the economy is often unpredictable. Even if you are just now at the business formation stage, it is important to think about how and when you may want it to end.
If you are a part of a family-owned business in Texas, consult an experienced business law attorney. A lawyer who is knowledgeable about the concerns and issues surrounding business formation, ownership and succession can help you at all stages of your business.