Most Family Businesses Fail—Here’s How to Prevent That
Owning a family business is a major achievement. You’ve spent years—maybe decades—building something valuable. But what happens to your business when you’re no longer running it?
Here’s a tough reality: 70% of family businesses don’t survive past the second generation—and 90% don’t make it past the third. It’s usually not because of bad business decisions. It’s because of bad estate planning.
Without a plan, your business could:
- End up in probate, delaying operations for months or even years
- Get sold to cover debts or taxes, instead of staying in the family
- Cause conflict among heirs who can’t agree on leadership or finances
- Leave a surviving spouse without income if they aren’t involved in the business
The good news? This is preventable. But planning ahead is key.
Common Challenges in Family Business Estate Planning
Every family business is different, but most face these three big challenges when planning for the future:
1. Only One Child Wants to Run the Business
If you have multiple children, they may not all want to take over the business. But how do you distribute your estate fairly?
- Do you leave the business to one child and give other assets to the rest?
- What if most of your wealth is tied up in the business?
- Should the child who takes over buy out their siblings?
There’s no “one-size-fits-all” answer, but addressing these questions now can prevent major family disputes later.
2. Providing Income for a Surviving Spouse
Many business owners assume their spouse will be financially secure. But if the business provides the household income and they don’t have ownership or control, what happens after you’re gone?
Some solutions to consider:
🔹 Structuring payouts so your spouse continues receiving income
🔹 Giving them limited ownership without operational control
🔹 Setting up a trust to manage distributions
Without planning, a surviving spouse might lose financial stability, or worse—get caught in a power struggle with your heirs.
3. Business-Owned vs. Personally-Owned Real Estate
Many family businesses operate out of real estate owned by the business owner, not the business itself. This creates huge problems if ownership isn’t clearly defined.
- If one child inherits the business and another inherits the real estate, who sets the rent?
- What happens if they disagree on lease terms?
- Should the business have the right to buy the property before it’s sold?
Unclear real estate arrangements can cripple a business, cause family conflict, or lead to a forced sale that benefits no one.
How to Protect Your Business for the Next Generation
While every business is unique, some estate planning tools can help ensure a smooth transition:
- Trusts: Can protect the business from probate and clearly outline who inherits what
- Buy-Sell Agreements: Help define what happens if an owner passes away or leaves the company
- Structured Payouts: Can provide financial support for heirs who aren’t involved in the business
- Legal Lease Agreements: Prevent future disputes over real estate ownership and rental terms
The key is to plan before there’s a problem. Waiting too long can lead to court battles, financial hardship, and even the loss of your business.
Start Planning Now—Before It’s Too Late
If you own a family business, these hard questions need answers sooner rather than later. The best time to plan was yesterday. The second-best time? Right now.
Every situation is different, and estate planning isn’t just about documents—it’s about making sure your business survives for future generations.
Want to discuss a plan that fits your business?
Let’s talk.Contact us today to protect your business and your family’s future.
