IF THE BUSINESS SHOULD BE KEPT WITHIN THE FAMILY – FACTORS TO BE CONSIDERED Who will own the business and in what proportions? Will children who are not actively involved in the business receive an ownership interest in the business?  Who will run the business? If one particular family member or key employee has shown obvious management skills, he or she may be the best person to manage the business.  But if family members have varying interests or different ideas about how the business should be run, such an arrangement will lead to inevitable conflict.  This problem is compounded where the founder retires rather than dies and tries to continue to manage the business and resist delegating real control, even after he has officially retired. The temptation may be to leave control to the eldest child, though that person may not have the necessary (describe) skills to run the business.  This person may be the best person to head the family, but he or she may not be the best person to head the business. Family dynamics play an important role in all phases of family business operation. Family dynamics are especially important in determining how succession will occur. It is useful to consider family members' feelings and motivations in this area and how those feelings will affect the succession decision. Personalities may also come into play.  A parent may be uncomfortable with handing over control to a child. A father may be proud of an adult son but still feel the son lacks sufficient intelligence, skills, or drive to run the family business. An older brother may be resentful if a younger sibling is chosen to run the business, even though it appears to be a rational choice. How to deal fairly with children who will work in the business and those who won’t.  There may well be conflicts between the children who work in the business and those who don’t.  The former may want to keep ownership in the family, fearing that they will lose their jobs if the business is sold.  The non-active family members, on the other hand, may want to see the business sold for the highest price, or sell their shares to outsiders. Such tensions can bring out the worst in a family and amplify jealousies, conflicts, and disputes that may have been simmering for years.  Most family businesses simply can't afford to buy out nonparticipants unless there is life insurance in place and the founder dies. Life insurance premiums themselves can be a serious cash drain. Additionally, most companies cannot afford to pay dividends that would produce a return that most people would find acceptable.  Paying dividends in a C corporation comes at a tremendous tax cost and is hardly the way for a family to accumulate wealth. There is no simple solution.  Whatever the cause, the lack of a definite successor can create chaos after the client's retirement or death. The best course is for the client to make a decision, for better or worse, and then to structure the transfer to ensure that the successor's position will not be immediately undercut by other family members. How will the transfer of ownership take place? Is the owner willing to transfer some ownership interest in the business now, or only at death?  Lifetime transfers should be planned ahead of time and phased-in.  Planned, phased transfers create a positive environment characterized by trust, choice, moods of opportunity and possibilities, composite strength, and mutual support. They enable training, testing, and gaining of experience. If there is a transfer now, how much control does the owner wish to retain during his lifetime?  Is s/he relying on the business to provide him/her and his/her spouse with retirement income?  How will those payments be made? What happens if the owner dies suddenly and there is no family members with the know-how to run the business until the family find a buyer?