Easing Family Succession: How a Tailored Recap May Be the Answer

by Richard A. Vinci
Family and closely controlled businesses account for more than two-thirds of all businesses in the United States. Many family and closely held business owners start out with the admirable goal to pass the business on to their family members and/or long-term valued employees. Despite the genuine desire to see the continuation of the business in the family, only 30% of family owned businesses survive into the second generation and only 11% survive into the third generation with only 3% of all family businesses continuing through the fourth generation or beyond. These grim statistics have much to do with poor succession planning which is exacerbated by the lack of viable liquidity options for retiring family members.1As the statistics indicate, in most cases succession just happens rather than being planned thereby resulting in less than desired outcomes. Over the next decade, family-controlled firms will experience an unprecedented number of succession events. Since ensuring the continuity and success of the family enterprise is a top priority for most family business owners, these owners will be compelled to address some daunting and potentially unpleasant issues including, but not limited to, succession, control, tax planning and capital procurement for growth. Further complicating matters is the tendency for emotions to run quite high around the family succession of the business which can lead to messy litigation. More…

When Family Shareholders Want Out

Too Many Aunts, Uncles, and In-Laws Who Own Stock and Have Clashing Interests and Personalities can Bring a Company to its Knees.
Here’s how to Buy Out Some of Your Family Shareholders to Preserve the Peace.

by Harvey D. Shapiro

Death, it sometimes seems, may be the easiest way out of a family business. With proper attention to insurance, succession, and estate planning, those who leave this veil of tears can also depart from their family firm with limited impact on the business. Other exits are often decidedly more traumatic for the businesses and the individuals involved.

Nonetheless, many family business owners have to realize there inevitably will come a time when some shareholders decide they want to do something else with their time and money. They may want to convert their investment into assets that are more liquid in order to meet other personal or business needs; they may want to diversify their assets to avoid relying too heavily on the company; or, they may find themselves tired of the business–or (perish the thought) their relatives. More…