When the owners of family-run businesses begin thinking about a succession plan, they need to consider something much more important than just all the paperwork involved. They need to focus on identifying who in their family should be the successor or successors, says Anthony (Tony) Marshall, an attorney in the Syracuse office of law firm Harris […]
When the owners of family-run businesses begin thinking about a succession plan, they need to consider something much more important than just all the paperwork involved.
They need to focus on identifying who in their family should be the successor or successors, says Anthony (Tony) Marshall, an attorney in the Syracuse office of law firm Harris Beach, PLLC, which is headquartered in Rochester. Marshall spoke with CNYBJ from Florida on April 18.
“We want to identify persons who are likely candidates involved in the business to buy the business and also those who have the skill set, or potential skill set … to take over management,” says Marshall, whose practice partly focuses on corporate tax and trust and estate issues. Most of his clients are closely held, family businesses in upstate New York. Marshall says he is also licensed as a certified public accountant (CPA).
Speaking generally about Syracuse–based family businesses, when the owners, usually a husband and wife, reach their 50s in age, their kids are likely teenagers or in their 20s. The parents have to determine if any of their children want to and are qualified to become owners of the family business.
While doing so, the current owners need to consider two questions, says Marshall.
“Who am I going to identify and put in place to take over this business?, number one, and number two, what are the economics of the deal?,” he adds.
If an owner’s children are involved and the owner is “financially secure” without needing to cash out of the business, then the succession process is “a bit simpler.”
“It almost becomes like an estate-plan matter in structuring the family plan that involves the company-ownership interest,” says Marshall.
If the business doesn’t have family members who are in line to take over the leadership role, the owner will either target other “key employees” or work to sell the business.
When a family business owner reaches age 50, Marshall believes he/she should start thinking about or discussing a succession plan, even if only informally.
“You’re 52. You’ve made a fair amount of money. Do you want to work until you’re 66 or what do you want to do?” Marshall asks, paraphrasing how he might approach a client with the succession topic.
He also recommends a business owner involve the firm’s independent CPA when discussing succession planning.
“I think that’s wise to recommend,” says Marshall.