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Sell Business or Give to Family?It is important to decide early on whether you want to eventually transfer your business to family or sell it to a buyer. The reason is that the planning methods are completely different. When you want to sell it, you increase your value as much as possible. When you transfer it to your children, you want to decrease the value as much as possible unless you planned ahead and started transfering the business to your children early on. If you are going to have family take over, it is important to also start training them early.
There are many things to consider when making this decision:
- How motivated, interested and capable is the family member that would run the business. Typically, businesses fail 60% of the time after passing it along to children and then 90% when they pass it on to your grandchildren. The reason is usually that they are not as passionate about the business as you were and have other motivators.
- If you sold the business and passed some of the money to your children so they can pursue their interests, would they be happier? Would you?
- When you have family working in the business with you, will it cause stress in the relationship?
- How soon do you want to retire? If it is soon, the return you and your family will get by training your children and transfering it to them has proven to be worse than cashing out. If you plan on retiring in at least five years and your children are motivated, it might make more sense to give the company to the children
- How much control do you want? If you give the company to children, you are also giving up control to them which can be a problem if you are still using the company to support you.
If you need help deciding which route may be the best for you and your family, contact us.
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