Many family businesses here in Texas go back several generations with lasting legacies. However, the current caretakers of the ranch, store, restaurant or business need to adapt and grow to keep the lights on and prepare to pass it along to the next generation.
Disputes on keeping it going will sometimes arise between siblings, cousins or stakeholders. Below are a few key steps that help minimizes discord and smooth the transition from one generation to the next.
Draft an effective operating agreement
Even family-owned operations need contracts. An operating agreement can provide clarity in defining each partner’s role, and it can also outline protocols for addressing disputes that may arise. Clear guidance can minimize confusion and avoid turning a one-day problem into an ongoing battle of wills.
Have a plan for succession
Trying to predict the future is impossible, but gathering information and developing a succession plan helps better ensure the legacy continues. Stakeholders may have different thoughts, but the owner or decision-makers should have a plan in place if there is an illness, incapacity or unexpected death. As with estate planning, this succession plan avoids survivors trying to guess the owner’s or stakeholder’s intentions. This better ensures the business’s continued viability during a time of great uncertainty. Even if the business owner made their intentions known to their heirs, it is still best to put it all in writing with the help of an attorney – these legal professionals can better ensure that arrangement is legal and less likely to cause a dispute.
Revisit these issues
Things change, so it is wise to revisit these arrangements and plans from time to time. People divorce, move on or lose interest, so it is essential that the arrangements still make sense. A business law attorney can be a tremendous asset to business owners and their families, providing peace of mind that the business continues to be a vital part of the family and community.