Succession planning for family businesses

Family-owned businesses in Maryland often fail after they are passed from one generation to another. To ensure the continued success of a family business over multiple generations, the current owners should give careful thought to business succession planning. About five to 10 years before family business owners plan to retire, they can begin a gradual transition of business ownership to ensure that the next owners will be successful.

One of the reasons it can be difficult to achieve prolonged success with a family business is that families and businesses have very different characteristics. While family members accept each other’s shortcomings and poor performances, businesses must be run productively and logically. Although siblings in a family business may want everything to be fair, the reality may be that one sibling is more capable of running the business than the others.

If a family business owner decides to leave the company to a family member, it is important that the family member is well qualified for the leadership role. The original business owner can train the family member on what they need to know to run the business during a gradual transition period before retirement. During this time and after the original business owner’s retirement, key employees should be retained who can assist the next business leader with their new responsibilities.

A business and commercial law attorney may be able to assist a family business owner with long-term business planning. Whether business owners are planning to leave their companies to the next generation or sell them before retirement, an attorney may be able to advise them on the most efficient exit strategy.

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