If you own a family business, take a lesson from this potential crisis brewing now in Taiwan.
In Taiwan it is normal for even extremely large multinational businesses to follow the traditional Chinese model: one person founds the business and continues to run the day to day operations. When the founder passes away, the business is divided between the founder’s surviving family members. Many family-owned businesses in the U.S. have a similar plan. However, as the BBC News reports, in a recent article titled “The tricky business of succession planning in Taiwan,” succession planning in Taiwan usually stops there.
No one is certain who exactly will run the business in Taiwan when the founder passes away. As the founder does not delegate any authority to possible successors, no one is even capable of running the business. Other businesses have trouble, usually because siblings do not get along and cannot agree about how the businesses should operate. Because approximately 90% of the businesses in Taiwan are family-owned this is a big concern for the nation’s economic future.
This is not just a problem for companies in Taiwan. Many family-owned businesses in the United States make the same mistakes. Leaders often are loathe to delegate responsibilities to successors before they are ready to retire. Many family-owned businesses do not plan for how siblings, who will be co-owners of the business, will divide responsibilities between themselves. If you own a family business and you want it to survive to the next generation, then it is vital that you make a business succession plan a part of your overall estate plan. Your family and employees need to know who will be in charge after you, and the person you choose needs to be up to the task before he or she takes over.
Contact your estate planning attorney who can coordinate the effort with you accountant and financial advisor. You can take action now to ensure your family-owned business will survive you.
Reference: BBC News (July 30, 2014) “The tricky business of succession planning in Taiwan”