Enhancing the opportunity for success in family business transitions
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New Hampshire’s economic landscape is dominated by family businesses. Generally, the family business in the Granite State is small and entrepreneurial, but not ready to be transferred to the next generation. Understanding the goals, interests and talents of family members is critical to developing a plan for transition.
The size and nature of family businesses vary and all are unique and complex blends of family history and emotion. This dynamic, when mixed with individual skills, management styles and personalities presents fertile ground for conflict. As a result, the family business rarely succeeds to a third or fourth generation.
To improve the chances of a successful transition, begin the planning process early, remain flexible and keep the lines of communication open. Some best practices to observe include the following:
- Embrace the long-term view rather than immediate results.
- Retain the entrepreneurial spirit of the founder(s); failure to evolve means extinction.
- The owners of family businesses in New Hampshire frequently “put all their eggs in one basket” and expect the business to financially support their retirement. This practice puts great stress on the business. Alternative retirement vehicles can reduce the stress.
- Honestly assess the next generation’s interest in the business. Communication with family members about their goals is critical to the implementation of a succession plan. Their drive and maturity should be apparent and in place prior to a transfer of either control or ownership.
- Family members intending to stay in the business require extensive training in all aspects of the business as well as real-world experience.
- Consider expanding management and the board beyond the family. There may be individuals who can offer the business valuable experience and independence. As a “baby-step,” consider a board of advisors.
- Use of multiple entities affords a level of asset protection and flexibility with the transfer of ownership interests.
- Appropriate governing documents for the business(es), estate planning vehicles and the use of trusts and insurance products should be considered.
Finally, create your “team” of accounting, legal and financial advisors and draw on informational resources available to family businesses. Get involved with UNH’s Center for Family Business and seek out family business consultants for guidance and professional development. With help, you can realistically assess the family’s commitment to succession, develop a plan of action and enhance the opportunity for a successful transition.
Upton & Hatfield, LLP has been built on a foundation of over 100 years of dedicated service and high quality work. Our state-wide practice has offices in Concord, Hillsborough and Portsmouth. We have developed a reputation—client by client—for outstanding representation in a wide range of legal areas. Our reputation is the product of our attorneys’ hard work, community service, knowledge of the law and focus on solving our clients’ problems. To that end, our mission is the same as it was a century ago—to offer the best representation possible for our clients.