“There are three things that cut across families in business – the need to talk better, plan better, and make better agreements,” observes John Davis of the MIT Sloan School of Management. These three things are fundamental to a successful transfer of a family business, yet family dynamics, often fraught with emotion, get in the way.
Family businesses require more planning than other types of organizations because they are more complex, the University of Cincinnati’s Goering Center explains, and “good agreements are the most valuable management practices in a family business system.” At Geyer Law, we couldn’t agree more with the three comments by the Goering Center as to why this is so:
- Agreements are symbols of respect.
- Agreements represent a snapshot in time.
- Agreements can be changed should the parties agree change is needed
Business law involves the initial choice of business entity (sole proprietorship, partnership, limited liability company (LLC), or corporation), then the execution of appropriate documents including:
- buy-sell agreements
- employment contracts
- business formation documents
In planning for a transfer of business control, it’s important to take into account differences in personality types between generations – and between individual people. Some important qualities.the Goering Center points out, include:
- self-awareness
- communication skills
- financial acumen
- strategic thinking
- industry knowledge
Successors need to be groomed and developed. Meanwhile, the first generation must create a vision for their own life when they stop being the owner of a company. Well-organized meetings facilitated by an outside, unbiased party, the Goering Center authors add, help create a structure through which good communication can occur.
At Rebecca W. Geyer & Associates our overarching role is to serve as good leaders in the intergenerational communication process that makes the transfer of assets – and of mission possible.
– by Rebecca W. Geyer
