If you own your own business and are looking towards retirement, part of your estate planning should include deciding what happens to your business.
It’s tempting to think that the best option is to pass on the business to the family, especially if they are already involved. After all, some of the world’s most famous companies are still owned by the family and descendants of their founders.
- US supermarket giant Walmart was founded by Sam Walton in 1952. When Walton died in 1992, he left 50% of the company to his wife and children. Many of the family still serve on the board and work in various roles.
- Automotive giant BMW was founded by Günther Quandt. The family currently hold a 46% stake, with grandson Stefano owning a 17% stake.
- Luxury cosmetics giant Estée Lauder was founded by Estée and Joseph Lauder in 1946. Their two sons were active in the business from day one. Their son Leonard is currently chairman emeritus, with his own children in executive roles. According to the Estée Lauder website,
“The Lauder family now owns approximately 38% of total common and about 86% of the voting power.” - Theo and Karl Albrecht founded Aldi in 1946, growing the business from a small corner shop to a supermarket chain with over 12,000 stores. When Theo died in 2010 his sons inherited the business, historically split into Aldi Nord and Aldi Süd. The family still owns 100% of the business.
- The oldest family-run business in the UK is said to be R J Balson & Son, a high-street butcher in the market town of Bridport, Dorset. Robert Balson first opened his market stall in Bridport in 1515, and the family business has been continually trading ever since.
Do the family actually want your business?
Not every family member may wish to be part of the family business. They may not be interested, have plans of their own, or just not want to work for their parent/s. They certainly would not thank you to discover, if you passed away and left them the company without consulting them, that it was now their responsibility. (The same applies to your spouse, of course.)
Others may actually want to take over your business, such as relatives who are not your children, your existing business partners and fellow directors, your workforce and maybe even shareholders.
Are family the best people to run your business?
Even if family members are keen on inheriting the business, are they actually the right people to run it day to day? Might your level-headed niece, for example, be far more capable than your scatterbrain brother-in-law? By putting business succession planning in place, you can ensure that the business lives on and your workforce (and legacy) are protected.
The potential cost of inaction to your family
Business succession planning exists to ensure your business passes to the next generation. It is also essential to ensure the taxman doesn’t benefit most when you it pass on. For example, the family may have to sell the business as they didn’t have sufficient funds to buy out your fellow director/s.
For more info and examples, see our information on:
Not sure quite what’s best for your business?
Contact us. We’re happy to help with securing your business succession in your will, and to set up your business LPAs.
