Business Insider says the top two issues negatively affecting these small family-operated companies are taxes and structural conflicts. Seventy percent of small companies do not make it through the handoff from one generation to next. Estate taxes can irrevocably harm these companies. Disagreements can occur over the structure of these businesses and what to do with them when the first generation passes away or decides to retire.
Arguments over how to fund the business or who will be responsible for each part of the business can occur. These issues can pull a family together, but they just as often can split them apart. How can small businesses avoid these struggles?
Avoiding the Negative Family Impact of Small Business Ownership
Planning can help families avoid many of the typical stresses associated with being in business together. Life’s little surprises, like divorce, or illness, can throw a business into turmoil. This is why advance decision-making is so important.
Figuring out a succession plan way before the handoff is needed is critical to keeping everyone on the same page and avoiding any assumptions that can lead to hurt feelings later. While this venture is family-oriented, it is also a business. So, write down a plan in the same way you would map out finances and an overarching business plan with a non-relative. This should include job responsibilities, salaries, ownership shares, or anything else potentially affecting the business. You have a lot invested in both your family and your business and you do not want to lose either. Pre-planning is imperative for keeping a balance between business and family.
If you are struggling to determine the best course of action with your small business, it might be time to ask for help from an expert. Look to an accountant, financial advisor, attorney, or even a marketing expert, to help launch and sustain your business. These professionals can help keep your business growing while also assisting in the legal documentation necessary to protect your investments.
Creating a small business will affect your family, but with careful planning, it will not be a reason for conflict. Instead, it will be a source of pride.
If you’re ready to get started and are looking for help with start-up financing for your family business, Benetrends can help. We have a comprehensive suite of funding options, from 401(k)/IRA Rollover (known as ROBS) to SBA Loans and more. To learn more, download Innovative Funding Strategies For Entrepreneurs today.