It’s vital to have a tax and business plan in place for the success of any company, especially one that is family-owned. Here are some critical concerns that family business owners should consider.
1. Do you have a plan? Without a strategy, your company has no purpose and might not survive. You may rest confident that your fierce competitors have drawn up plans. Create a business plan with both short-term and long-term objectives. Set measurable goals such as earnings, growth, and market share targets. Plans for resolving conflict and moving on should be included as well.
2. Who’s running the store – family, outsiders, or employees? An organization chart should be created to clearly show lines of authority when several family members work for the firm. Promotions should be made in accordance with a well-defined set of standards.
3. Should the legal form of the organization be changed? While business forms are often simpler to start, more flexible in terms of future growth potential and management, and generally offer greater flexibility for personal liability protection than corporations or LLCs, it’s worth checking with an attorney about whether your company form is still the best choice for your organization. The legal structure under which you run may influence how much tax you pay
4. Have you reviewed your retirement and fringe benefit plans? The sort of plans accessible is determined by the type of business entity you have. Such programs can be useful in encouraging and retaining staff, especially if they are used as a tax planning tool.
5. Are formalities observed? Family members frequently forget that company assets are not personal property. Family members should have their own separate bank accounts to maintain family financial records secure. Use of corporate resources, such as cars, may result in taxable income for shareholders or employees. To properly structure agreements, seek assistance from an expert.
6. Who’s next in line? A robust member at the helm may be found in many family enterprises. However, that individual won’t live forever.
How a family business is run depends on how well one generation hands over control to the next. The more relatives involved, the more difficult it will be.
According to facts, only 30% of family-owned firms survive to the second generation, and just 13% survive to a third generation. Planning carefully while you’re still in command may prevent your company from failing.