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Transferring Ownership of a Family Business: A Step-by-Step Guide

Transferring ownership of a family business requires careful planning and consideration if you hope to execute it effectively. The intricate dynamics of family relationships, combined with the complex nature of business operations, make this process both challenging and crucial for long-term success. The way you handle this transition bears implications for your family, your business, and your legacy. In the interest of helping you handle your own transition, here are ten steps to consider taking with your family business.

Step 1: Get an Early Start

The transition process can be lengthy, often taking place over a number of years, so it’s important to initiate it well before you plan to actually step away from your business. An early start affords your team ample time to evaluate potential successors, train them, and allow them to gain the necessary experience before assuming the mantle on a full-time basis. It also provides time to plan for potential contingencies and address any hurdles as they arise.

Step 2: Develop a Succession Plan

A comprehensive succession plan outlines who will take over the business, when and how the transition will occur, and what the roles of various members of the business will be during and after the transition. Your plan should also articulate your vision for your company’s future. How will you ensure that your business continues to thrive in your absence? This plan should be communicated clearly to all stakeholders – family members as well as non-family stakeholders – to minimize misunderstandings and conflicts.

Step 3: Choose the Right Successor

The successor you identify should have the necessary skills, experience, and passion to guide your business toward the future you envision. While this may well be a family member or someone else internal, the most qualified and ideologically-aligned successor could end up being an external candidate. This is one of the most important decisions you’ll make for your company’s future and it will play a role in determining your legacy, so consider prioritizing the needs of your business over familial ties.

Step 4: Prepare Your Successor

Once you’ve chosen a successor, invest time in their development. This may involve mentoring, formal business education, or hands-on experience in various aspects of the business. The more prepared your successor is, the smoother the transition will likely be. Think about surrounding your successor with a trustworthy and knowledgeable team that can answer questions, offer guidance, and provide insight into the inner workings of the business.

Step 5: Make It a Gradual Transition

A gradual transition can also make the process smoother. This allows your successor to ease into their new role while letting you scale back your involvement in day-to-day operations at a pace you’re comfortable with. It also provides continuity for employees and customers.

Step 6: Establish Governance Structures

Well-defined governance structures can help manage family dynamics and business decisions more effectively. This might include a family council, a board of directors, or an advisory board comprising both family and non-family members. Even if you intend to keep the business within the family, incorporating a variety of perspectives into the decision-making process can pay off in a big way.

Step 7: Address Potential Conflicts

Business transitions can lead to conflicts due to perceived inequities or differing visions for the business, and this is often even more relevant for family businesses because the personal stakes are higher. That’s why it’s important to have open and honest conversations about potential issues and find ways to address them proactively.

Step 8: Consider Your Own Future

Don’t forget to account for yourself when you plan for the future of your business. As the current owner, consider what role, if any, you want to have in the business post-transition. How will you replace the feeling of ownership and fulfillment you derived from your business? You should also plan for your financial needs in retirement, and how the transition may impact these.

Step 9: Update Your Plan Over Time

The business environment, family dynamics, and personal circumstances can change, and these changes may require adjustments to your transition plan. Regularly reviewing and updating your plan will help keep your plan relevant, effective, and aligned with your wishes.

Step 10: Partner With a Professional

There’s a lot that goes into transferring ownership of a family business, and partnering with a trusted advisor who specializes in these types of transitions can help you juggle the many legal, financial, and emotional considerations the process entails. In addition to an advisor, you may want to engage other professionals such as lawyers, accountants, and business consultants who can provide valuable guidance and help you avoid potential pitfalls.

Transitioning ownership of a family business can be a challenging but rewarding process. By following the steps discussed above, you can help ensure a smooth transition that safeguards your business’s legacy and nurtures its future growth.


Robert (Rory) J. O’Hara III, CFP®, CRPC®

Founder I Senior Managing Partner

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