Successfully navigating family business inheritance issues requires knowledge of estate and succession planning. It also requires understanding complex family dynamics and the unique challenges business owners face as they create estate and succession plans.
At Harris Law Firm, our Mississippi estate planning attorneys have a combined decade of experience with personalized guidance to help families resolve disputes, protect businesses, and maintain long-term sustainability. We work to preserve the legacy you have built and the relationships that matter most.
Our roots in our community and legal acumen allow us to provide practical and compassionate solutions. Contact us today to learn how we can help your family business thrive for generations.
What Unique Inheritance Do Family Businesses Face?
Family businesses represent both a legacy for older generations to leave to younger generations and a way to provide for family members across generations.
Inheritance disputes often threaten both the business’s future and family peace. Understanding what challenges frequently arise can help your family business prepare for and avoid these risks.
Family Business Succession Issues
Family businesses are more likely than other businesses to lack clear business structures or fail to follow formal operational rules. This informality may lead to failure to establish a clear, unambiguous succession plan in writing.
Family business succession issues about leadership, ownership, and operational control often arise without a clear succession plan.
Unequal Asset Distribution
Family businesses often involve individuals with varying levels of:
- Monetary and personal investment,
- Direct contributions to building the business, and
- Participation in business operations.
As a result, planning for the business’s future success may justify leaving certain family members more value under your estate plan than others. As a result, both equal and unequal asset distribution can lead to resentment or disputes during the probate process.
Yet, without a clear estate plan, your heirs may lack the authority to manage assets, risking inefficiency and harmful business mismanagement.
Taxes and Liquidity Issues
Estate and inheritance taxes can reduce the amount your heirs receive and negatively impact your assets, particularly in cases with limited asset liquidity. Heirs may need to sell key business assets or secure loans to have funds to cover costs associated with paying taxes or fairly distributing assets.
Conflicting Business Visions
Heirs often have competing ideas about the future direction of the family business. Disagreements risk creating operational gridlock, delaying critical decisions, and threatening short- and long-term success.
Strategies for Resolving Inheritance Issues
Resolving family business inheritance issues requires comprehensive estate planning tied into proactive succession planning. By planning carefully, you can protect your business’s legacy and long-term viability from inheritance disputes.
Business Planning
Establish rules for how your business operates using governing structures and various policies. Business governance rules may establish:
- Leadership structure and hierarchy,
- A regular meeting schedule,
- How ownership interests work, and
- What owning an interest entitles you to.
Consider also creating company policies to address, for example:
- Hiring, employee management, and respect in the workplace;
- Health and safety;
- Data protection, IT, and cybersecurity;
- Expenses and reimbursements;
- Resolving customer concerns; and
- Compliance with reporting requirements and laws applying to your specific industry.
Create open and honest communication. Consider holding regular business meetings to discuss expectations, concerns, and goals and ensure all parties understand the reasoning behind decisions.
Establish a succession plan, including a buy-sell agreement specifying how ownership interests transfer in specific scenarios, such as:
- Death,
- Disability, or
- Retirement of an owner.
The agreement should outline procedures for valuing the business and establishing purchase terms.
Estate Planning
Business assets to address during estate planning may include:
- Ownership interests in corporations, LLCs, partnerships, and sole proprietorships;
- Business real estate, equipment, and other physical property;
- Business financial accounts, such as operating or payroll accounts; and
- Intellectual property registered under the business owner or business’s name.
To reduce the risk of disputes, consider the following:
- Complete periodic business valuations to fairly and accurately assess the value of ownership interests over time;
- Establish one or more trusts to transfer business assets and ownership interests into while setting terms about asset management and distribution; and
- Designate someone as an impartial executor or trustee to manage asset distributions, enforce succession plans, and mediate disputes.
A lawyer can help you find a strategy that works for your business, family, and you.
How Harris Law Firm Can Help
Harris Law Firm’s attorneys understand the intricacies of Mississippi law and the emotional challenges that arise during inheritance disputes. We offer comprehensive estate and succession planning to balance your estate plan, business needs, and family relationships.
We also guide clients through the probate process regardless of how thorough the deceased individual’s estate plan is. Reach out today to speak about your options.