The family-owned business is an entity that is estimated to account for 60 percent of all employment in the United States, including in Minnesota. Despite their successful track record, most of these enterprises don't make it past the third generation, at which time they usually sell the business to an outsider. These entities require estate planning to protect all pertinent family members and assure a successful transition from generation to generation.
It is recommended that the business begin planning for an exit strategy soon after it starts. For ongoing businesses, that strategy should be looked at as soon as possible. The process involves first deciding whether the current owner intends to sell in the short- or long-run or whether the owner will stay there for life. That leads to determining how to pass on the assets to one's heirs, either in the form of the sale proceeds or as an ongoing family-business operation.
It is also possible for the plan to give the heirs an option to liquidate the business or to continue operating it. When working with family-owned businesses, the estate planning and business formation attorney will first try to identify the players and their plans. Next, the attorney will look to identifying the transition choices and how to fairly make the transition according to the current owner's wishes.
An estate planning attorney in Minnesota and elsewhere will also address tax issues, insurance funding, valuation of the business and examination of all current documents. This may be followed by preparing all needed documents for the future. When the owners want to keep the business in the family, some attorneys find that it is nonetheless difficult to get those owners to sit down and execute the documents, mainly because the older person is reluctant to give up control to the next generation. This is a delicate area of expertise in which an estate planning attorney can be of great help in assisting the parties to carry out their true intentions.
Source: dailyprogress.com, "The tough task of keeping a business in the family", Allison Wrabel, June 25, 2016