It’s All in the Family… Tips for the Family Owned Business

H. Adam Shapiro

The vast majority of family owned businesses fail to reach the next generation of owners as a result of poor succession planning. In fact, according to the Small Business Administration, while almost 90% of business are family owned, less than 30% of these businesses survive its second generation. Family businesses face unique intra-familial succession issues that can devastate a successful business if they are not dealt with in advance.

While not an exhaustive list, the top succession issues that a family business should examine include:

1. Reconfirm the goal or mission statement of the business and identify the best personnel suited to carry the stated goal forward.

2. The development of an exit strategy for founding that not only defines the reduced roles but future compensation (cash and/or stock) after the transfer from one generation to the next.

3. The development of a training program to educate and/or mentor the next generation of leaders.

4. Reexamine compensation system and determine whether members are being compensated fairly and establish a system based upon objective criteria or goals.

5. Consider employment agreements designed to prevent key personnel from competing with your business during transition period.

Mr. Leavitt works in the Philadelphia office of Danziger Shapiro, P.C. where he focuses his efforts on assisting small to midsize companies with all aspects of their operations. Mr. Leavitt can be reached at (215) 545-4830 or at Leavitt@DS-L.com. The information contained herein is provided only for informational purposes and is not intended as legal advice.

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