Leaving the Keys for Your Family Business to a Trusted Heir

As a business owner, there is a situation when you need to leave the family business to the next generation. There is a need to decide as early as possible on who should continue running the company when you either die or retire. The following are the major steps to consider.

The business owners should be honest with the heirs

Since heirs don’t know much about the debts, most discovers about it when their owner die. Some plan to inherit a lot of wealth as soon as their parents die, only to learn that they had a lot of debts. A home business operator should share the complete financial picture with the heirs. They should give out list of the assets, and liabilities as well as the name of beneficiaries if any to the heir. Account numbers and password should also be given out to secure family business in future.

Buying enough life insurance

It helps in income protection; it also benefit heirs when paying off a debt on inherited items e.g. mortgage or vehicles that they wish to keep. An heir, who inherits a car or a house might be likely to get a mortgage as well as an auto loan. If the owner was having a lot of debts, the executor might be forced to sell off those items to repay the loan. Life insurance will cover and protect such loss if it rises.


Naming a person as the beneficiary but not your estate

In some states, accounts and family homes are shielded from creditors. Assets such as payable-on-death bank and brokerage accounts will be difficult for creditors to access them since they have direct beneficiaries, and they don’t provide official proving of a will.

Payment protection insurance

If the business owner becomes disabled and unable to pay a loan or dies, payment protection insurance can pay off specific loans such as auto loan, credit card balance and mortgage. Again lenders may offer mortgage life insurance to pay off mortgages borrowed by the business owner.

Start paying debt as soon as possible

The best thing that heirs can enjoy from their inheritors is good wealth that is valuable that doesn’t have any debt. And to achieve this, one need to settle down any debt that is there in the business. It can be accomplished by stopping spending a lot instead taking that money to settle down all debt after listing them.


Put it a will

Some business owners think that their heirs will benefit from having an ownership stake in the business while they learn to manage it. It’s good, therefore, to write and make a will as to who will operate and manage the home business as long as one is alive. It will help to monitor how the business is being operated and managed, and this will help to correct mistakes when someone is still alive to keep control of the business.

The above steps are very vital for every home business owner. They will help him/her to secure the business until the next generation since a trusted heir will be left to operate the business well without any debt and with good value.

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7 Tips for Running a Family Business

Every family that owns a business makes it unique and complex in its way. But there are some common rules that govern the business to make it successful. The key guiding tips to follow are as discussed below.

Be careful not to abuse family relationship.

One should never give out either punishment or reward to a worker because they are either, a relative or you share a personal history. Exceptional work should be rewarded or praised. Also, any employee either a family member or a friend should be treated in a special way if they deserve it.

Never create two classes of employees.

Family members and non-family members should not be used. One should be careful not to show any family member a special treatment. Special favor to any family member worker will make other employees be de-motivated, and this can set a bad example or picture of the business. Also, non-family member worker should feel like a raise or promotion to the business even if they are not the family bloodline.

Never put family member on the payroll

When a family member is not working in the company or can’t make any contribution to the business, then one should never be included in the payroll. As an owner or manager, make sure that everyone has a role to play and their responsibilities should be started out, and it should be clear to avoid conflict. The performance of both family members and non-family members should be treated as alike. Also, when offering a contract such as a supplier, care should be taken not to offer such contract to a relative. Instead, a merit should be used to award contracts.


Communication should be honest and open.

All employees should have open and honest communication. Keeping a secret or hiding some facts will show out that the manager or owner is deceitful. Moreover, no-family employees shouldn’t feel like that the family members employees know more about what is happening in the business. To create a conducive environment, a two-way communication channel should be improved to reduce the threat and dishonest in the business.

Establish healthy boundary in the business

It touches couples who run a business together. There should be a rule that other family members should not work at the company off hours and outside the office. When someone is away from the office, a phone might be used to ask about company issues, and it should not exceed 15 minutes or more otherwise one will infringe someone’s personal time.

Be wise in making decision

Home business owner or manager should not confuse between family decisions and business decisions in any situation. It’s not good as well to allow family members to borrow company vehicles or to ask the company information technology person to set-up their home offices. Also, it’s not a good idea to pass off personal expenses e.g. a family vacation as business expenditure. The business should be professionalized.


Make family councils to address family matters

Some values might be shared among family members but not of the same vision. The family council will solve out issues when they arise. For example, when one member may want to grow the business and keep it privately owned while another member may want to sell it. Furthermore, one family member of the council should be appointed to report to board members or shareholders about any family decision and type of policy procedure so that the board can stamp and approve.

The family business needs expert owners so that they can run the business in a satisfactory manner. Transparency and honest is highly needed from both parties who operate in the business. Otherwise, if these terms are not meet, the business will collapse.

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