Family-owned businesses are an important part of the Albertan and wider Canadian economy. Across the country, nearly 50% of national GDP and over 6.9 million jobs are generated by family-owned businesses and enterprises. For this reason, leaders of family businesses must take succession planning seriously. Not only is it crucial for business continuity, but also for legacy, stability, and minimizing conflict in the long run.
Often, families delay business succession planning until they are faced with a sudden crisis. This can cause harm to both the business and familial relationships. By planning ahead with the help of an experienced business succession lawyer, families can stay prepared for the future.
At Verhaeghe Law, our business lawyers understand how complicated succession planning for family businesses can get. That’s why we aim to offer tailored solutions that fit the needs of our clients and their families. To discuss your options, schedule a consultation with our team today.
Unique Dynamics of Family Business Succession
If you’re involved in a family business, succession planning comes with its own unique dynamics and challenges. This is because relationships between family members introduce an aspect of emotional and interpersonal complexity that may not be present in non-relational businesses. When beginning the process of succession planning, leaders may need to take into account:
- Blurred personal and professional boundaries
- Generational gaps
- Sibling rivalries or relative rivalries
- Differing visions for the future
- And more
These factors may significantly influence how a succession plan is shaped. It’s important to understand that proactive succession planning can help you navigate these dynamics with minimal stress. It can take upwards of 5 years to implement a solid succession plan that preserves both the business and family relationships. Waiting for a crisis to strike may exacerbate tensions or emotions that are inherently involved in family businesses.
Strategic Options for Family Business Succession Planning
When developing a family business succession strategy in Alberta, there are many factors you’ll need to assess. Taking time to understand and develop the strategies outlined below can help you plan successfully for the future.
You may want to consider:
- Open Communication: When family is involved in business succession, it’s important that business leaders maintain open and honest lines of communication. This can help prepare potential successors while also minimizing conflict between competing parties.
- Role Assignment & Governance: Early on in the planning process, you should clearly define who in the family will assume leadership roles (like CEO or CFO) and governance roles (like on a family council or board of directors). To avoid later power struggles, you may want to implement a clear decision-making framework into your succession plan.
- Performance Metrics & Assessments: To help a family business leader decide how they will assign roles, they may want to undertake both qualitative and quantitative assessments of their family members. You can assess your potential successors for their skill, interest, and commitment to the business by creating mentorship or training plans. This process may start years in advance of the actual transition. You might also consider setting KPIs to track the development of your successor or business after the transition has already taken place.
- Legal Documentation: Your succession plan must be developed in a legally binding and authoritative way. During the planning process, you’ll need to review documentation like wills, buy-sell agreements, shareholder agreements, Powers of Attorney (POAs), and more. It’s particularly important that you integrate your family business succession plan within your broader estate plan with the help of an experienced wills and estates lawyer in Alberta.
- Professional Guidance: Engaging with legal, financial, and tax advisors can help you bridge the gaps between family, business, and ownership. You may want to consider working with a lawyer for mediation or a professional for family counselling if any emotional or interpersonal issues arise.
Thinking About Creating a Succession Plan for Your Family Business? Contact Verhaehge Law Today
Succession planning for family businesses can take years – starting early is essential. Taking a proactive approach to your family succession plan can increase stability, reduce conflict, ensure continuity, and preserve business value.
At Verhaeghe Law, our Edmonton business lawyers help family businesses create customized succession plans that balance personal goals with legal and financial security. Contact us today to start planning for your family’s future.