Succession planning for business owners with children can be difficult when deciding which child should take over the company.
Some parents find it challenging to treat their children equally when one may be better suited at business than others, according to personal finance website The Street. When faced with the prospect of multiple successors, many owners turn to business partnerships to give each of their children a stake and role in the business.
While these partnerships can help quell feelings of favoritism among successors, a poorly outlined succession partnership can result in infighting among siblings that may threaten the company. Business owners who plan ahead may have more time to prepare children for the demands of running a business. For example, parents who take a step back from operations and allow future successors to play a larger role may give them insight into the types of problems that may arise, according to the University of Massachusetts Amherst Family Business Center
During this transition period, business owners can retain the authority to step in and mitigate potential problems. This phase may also educate successors on their own strengths and weaknesses, giving them time to correct any shortcomings that may affect the business’s bottom line.
In addition, developing a partnership charter that clearly outlines each child’s role in the company, responsibilities and stake in the business can help prevent sibling infighting and make the estate administration process easier. Charters should include the strategic plan for the business, the roles, titles and authority of each partner and how much money should go in and out of the business. These stipulations can be crucial when siblings have different ideas of where they would like to take a business in the future.