The Biggest Threat to Family Businesses Isn’t Taxes. It’s Lack of Planning.

Family businesses are built over years, and often over generations. Naturally, owners spend a lot of time thinking about taxes and how to preserve what they’ve built. However, in our experience, taxes usually aren’t the biggest threat to a family business. A lack of planning is.

Many owners spend years worrying about tax savings while putting off much bigger questions:

  • Who will eventually own the business?
  • Who will run it?
  • What happens if retirement comes sooner than expected?
  • How should children who work in the business be treated compared to those who don’t?

Starting the conversation

Those aren’t always easy conversations. Some owners would rather sit through an IRS audit than have a discussion with their kids about succession planning. Unfortunately, waiting too long can create problems. We’ve seen situations where the next generation wasn’t prepared, ownership expectations weren’t clear, or important decisions had to be made quickly because there was no plan in place.

Simple first steps

The good news is that succession planning doesn’t have to be complicated. It often starts with a few simple steps:

  • Reviewing buy-sell agreements.
  • Updating estate plans.
  • Obtaining a business valuation.
  • Considering gifting opportunities.
  • Talking openly with family members and key employees.

Planning for the future

Tax planning is important, but preserving the business and making sure the next generation is prepared are usually much bigger concerns. Family businesses have enough challenges without uncertainty surrounding ownership and succession. A little planning today can go a long way toward ensuring the business continues to thrive for years to come.

If discussing succession with your children sounds less appealing than reviewing your tax return, you’re probably not alone. At AHP, we work with family-owned businesses every day and understand that no two situations are exactly alike. Whether you’re just beginning to think about succession planning or are ready to take concrete steps, our team can help you navigate the tax, valuation, and strategic considerations involved. If you’d like to discuss your goals for the future of your business, we’re here to help.