Types Of Family Business

Types Of Family Business

“I say, ‘If we roll the clock ahead 20 years, what do you want it to look like?’” Ms. Steverlynck said. Some families may not want to remain in business together, she said, while others want to build a dynasty.

As in all models, families also tend to replicate this model. This generally leads to defensive rules or protocols to sustain the model, using them to protect the company from the least professional family members.

19. The Obsessed Owner: This type of owner has little or no life outside of the business.They have typically neglected their relationships with their children and their children often feel that the business is more important to the obsessed owner than they are, and they are often right. Their only source of self-esteem is in the success of the business. These owners have great difficulty in letting go of control to their successors, and their goal is to “die in the saddle.”

A variety of tools are available that can help a business owner defer the transfer taxes associated with handing down a family business. A basic will outlines the owner’s wishes regarding the distribution of property upon his or her death. A living trust creates a trustee to manage the owner’s property not covered by the will, for example during a long illness. A marital deduction trust passes property along to a surviving spouse in the event of the owner’s death, and no taxes are owed until the spouse dies. It is also possible to pay the estate taxes associated with the transfer of a family business on an installment basis, so that no taxes are owed for five years and the remainder are paid in annual installments over a ten-year period. Other techniques exist that allow business owners to exclude some or all of their assets from estate taxes, including a unified credit/exemption trust, a dynamic trust, and an annual exclusion gift. Since laws change frequently, retaining legal assistance is highly advisable.

ImageTaylor Made Sales Agency is an equestrian sales and boarding company. Mr. Taylor has worked on improving his leadership style, which wasn’t a match for his brothers. “I’m a thinker, not a feeler, and I have three brothers who are feelers,” he said.CreditLuke Sharrett for The New York Times

One of the largest trends in family business is the number of women who are taking over their family firms. In the past, succession was reserved for the first-born son, then it moved on to any male heir. Now, women account for approx. 11-12% of all family firm leaders, an increase of close to 40% since 1996. Daughters are now considered to be one of the most underutilized resources in family businesses. To encourage the next generation of women to be valuable members of the business, potential female successors should be nurtured by assimilation into the family firm, mentoring, sharing of important tacit knowledge and having positive role models within the business.[13]

A genogram is an organization chart for the family. It is an enhanced family tree that shows not only family events like births and deaths, but also indicates the relationships (close, conflicted, cut-off, etc.) among individuals in the family. It is a useful tool for spotting relationship patterns across generations, and decrypting seemingly irrational behavior.

Since the early 1980s the academic study of family business as a distinct and important category of commerce has developed. Today family owned businesses are recognized as important and dynamic participants in the world economy. According to the U.S. Bureau of the Census, about 90 percent of American businesses are family-owned or controlled. Ranging in size from two-person partnerships to Fortune 500 firms, these businesses account for half of the nation’s employment and half of her Gross National Product. Family businesses may have some advantages over other business entities in their focus on the long term, their commitment to quality (which is often associated with the family name), and their care and concern for employees. But family businesses also face a unique set of management challenges stemming from the overlap of family and business issues.

Strategic planning—centering around both business and family goals—is vital to successful family businesses. In fact, planning may be more crucial to family businesses than to other types of business entities, because in many cases families have a majority of their assets tied up in the business. Since much conflict arises due to a disparity between family and business goals, planning is required to align these goals and formulate a strategy for reaching them. The ideal plan will allow the company to balance family and business needs to everyone’s advantage.

“We had family members in the business and assumed they were looking after each other,” said Tom White, the chief executive and the husband of one of the owners. “They weren’t.”Stephanie Kilroy, his sister-in-law and an owner of the company, said the family business hadn’t been mismanaged; it had been “unmanaged.” So the family created governance policies to help align its members and run the business more efficiently.But it became clear that more help was needed, so the family brought in Mr. McCann. In the process, it decided that the best solution would be for Ms. Kilroy and her sister, Mr. White’s wife, to buy out the other relatives.“We had tiptoed around the deeper issues that related to family dynamics, and it really caught up to us,” Ms. Kilroy said. “We worked on resetting the family ownership group and committing to the emotional intelligence aspect of families in business together.”The task can be long and arduous. Mr. McCann said the first year was particularly intense and time-consuming because it required the families to talk about issues that they may have been glossing over for years.

Everyone in the family (in all generations) obviously belongs to the Family circle, but some family members will never own shares in the family business, or ever work there. A family member is concerned with social capital (reputation within the community), dividends, and family unity.

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