When I have asked owners of family enterprises about planning for the continued ownership, I frequently am told that they have a buy-sell agreement. While that is a good start, I let them know that the discussion needs to continue.

I then ask the following questions:

  • Now tell me what does the agreement state about rights to employment for owners or family members, as well as participation in management and decision making?
  • Does it address how conflicts are handled among owners?
  • Does it provide guidance on the values of the family owners and how those values influence the enterprise?
  • Does the agreement address the need of some family members for liquidity and the impact on the capital needs of the business?
  • Is there guidance on the use of long-term trusts and the identity of trustees?
  • If purchases or redemptions of ownership interest are considered, does the determination of the price provisions clearly define a standard of value and the manner in which the price is determined?

Asking these questions can lead to thought-provoking conversations, and then to more comprehensive planning that addresses family dynamics and interests as well as the requirements of the business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.