One family successor or more?
Benefits of passing a family business to a single individual - and how to make financial provision for the others.
The best way to hand your business over to your family is to nominate a single successor from among your offspring or other relatives involved in the business. This isn't always practical or realistic, however.
In making your decision you must:
- determine objectively who can best take your business forward
- aim to reduce the potential for future conflict
Successful communication with all family members is crucial to making any decisions.
Remember that there are other ways of being financially fair to your offspring or other relatives without involving them all in the future management of the business.
For example, you could take out a life insurance policy for those who won't benefit from inheriting the business. Or you could split your business' shares into two classes - giving full voting rights to your successor and restricted or non-voting rights to family members with no managerial involvement.
If nominating more than one successor is your chosen option you should ensure the co-successors have a similar vision of the business' future and a similar commitment to it. To limit the potential for conflict - which could even lead to the break-up of the business - it can help if you:
- determine separate areas of responsibility for each successor
- put in place formal dispute-resolution procedures
- appoint an independent board of directors