Family Business Succession Planning

Talking About Wills and Shareholder Agreements on Planes

Talk about life imitating art. Last week, flying back from the west coast, I sat beside an elderly gentleman who said he recognized me as the author of Every Family’s Business. I’m thinking this is very cool. After more than 200 speeches I’ve finally made it – I’m not just a best-selling author I’m a celebrity author!

It was only five minutes into the conversation that I realized my book was poking out of my briefcase. Humbled and self-effacing, I settled into a three-hour talk about family businesses. And boy did I learn a lot.

I love old guys who have founded a business. You can see the deep worry lines in their faces and there is a calm rawness in their view of the world. But above all else, whatever their politics and religion, they are “real” – authentic battle-weary survivors. The guy beside was no exception. So like the fictional character in my book, I ordered a scotch and began asking my new best friend how and when he thought he was going to exit his business. His response: “When I die.”

I’ll exit my business when I die

Wow, now there’s a conversation stopper. I forged ahead. He had mentioned his wife in the conversation and talked about a couple of minority shareholders, so I asked him whether he had updated his will and his shareholder agreement.

My new friend acknowledged that he had done both. When I asked him whether one attorney had reviewed both agreements he swiveled in his seat and faced me fully. “No” was his reply. “Why do you ask?”

As a convention speaker meeting thousands of business owners I’ve learned that most seek separation between their business and personal lives. They often have two attorneys, one for business and one for personal issues. Many leave all of their assets, including their shares, via their will to a surviving spouse and in their shareholder agreement they have the company redeem the shares or give the minority shareholders first rights to purchase the shares.

Lawyer up – it could be a full contact sport

In this scenario, when a business owner dies, and they all do, he sets up a legal battle over the rightful ownership of the shares. I regaled my seatmate with a story told to me by one of my readers, wherein the attorneys ground down a $2 million dollar estate to less than $100,000 battling over rightful ownership.

I hit the flight attendant button and ordered us both another scotch.

Does your spouse have a key to your office?

The remedy is simple and it’s sage advice for every business owner. Take your will and your shareholder agreement to one attorney and have that attorney review both documents to ensure they are consistent. And when you do, if your intention is to pass your business on to your surviving spouse – as was the plan for the guy sitting next to me – make sure you hand over a set of keys to your office. Most owners don’t. I receive emails from spouses (usually elderly women) whose husbands have died and left them their business. One such woman said she’d like to bring her husband back from the dead so she could kill him herself.

It’s odd when life imitates art. And when it does I’m reminded that we are visitors on this planet for such a short time. The state in which we leave our families when we go is something worth reflecting on.

Do you have an advisor who can help? Are you a trusted advisor who can help business owners avoid these problems?

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