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Ask Yourself Some Questions Before Giving Kid the Business
Many of our Kentucky readers who own a business and have kids have likely considered what will happen to a business when it's time to retire. Do you want to pass your business onto your child? Do you want to sell outside of the family? Every situation is unique, which is why people thinking about business succession planning should consider several factors before arriving at a decision.
One man, who founded an investment firm and has two children who are now adults, recently wrote a book that included questions every business owner should ask himself or herself.
The author suggests figuring out whether the child really wants to be a part of the business or is only doing it out of a sense of obligation or to avoid having another job. He said his rule is that his kids have to have outside employment for at least three years before he'd let them into the business.
Another important consideration to make is whether the business will be secure enough in retirement without additional business revenue. If you don't have enough money independent of the business, it could be a concern that a child would kill a business. This would involve making better investment decisions to improve retirement funds.
In addition to this, it's important to consider whether a child ruining a business you have invested a lot of time and money in will hamper your relationship in the future. The author suggests that the parent-child relationship should always take precedence over money. This could be a good time to consider selling the business instead.
Of course, it's also important to consider consulting with an attorney who has experience with business and financial planning. Outside, impartial advice could be helpful in a situation such as this.
Source: Work Goes Strong, "Creating a Business Succession Plan," May 29, 2013