Successful business owners do a lot of things well, and they make it look easy. This is often a sign of well-running processes and years of discipline. However, it can also be a trap for successful business owners who intend to pass their businesses onto their children or business insiders. While you may love the idea of keeping the business with someone close to you, you cannot let that love blind you to the realities of insider transfers.
Today, we’ll examine three things you should consider if you intend to pass the business to your children or insiders.
1. Financial independence must come first
Financial independence is the most important consideration for business owners as they plan for a successful future. However, it can also force you to make tough decisions about your business's future.
If you’re thinking about one day selling or gifting your business to a child or insider, it’s prudent to ponder how this decision can affect your financial independence.
For example, many business-active children and insiders don’t have the money you may need to achieve financial independence. This may mean that you must rely on promissory notes or consistent business success without you at the helm to attain financial independence. If your child or insider proves incapable of delivering, it could leave you in a financial undertow.
Before taking steps to hand the reins to a child or insider, it’s important to do two things.
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The 2023 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.