family business

Transitioning a family business to new owners isn't a job for the hasty, according to experts. Photo by Brett Jordan on

published on July 5, 2022 - 1:25 PM
Written by Gabriel Dillard

Starting a business and eventually passing it down to the next generation can prove overwhelming. Leaning on the right experts can help.

Mark Riley, market president of Bank of America Central Valley, said the most important first question is whether it should be passed to another generation or sold.

“The key thing is that the next generation needs to have a passion and a desire to carry on the business,” said Riley.

The decision — either selling or passing it down — can be emotional, he said, but the key to a healthy succession is putting the right team together. This includes a legal team, insurance agent, CPA and financial advisor who can guide the transition.

If business owners are looking to pass on the business, Riley recommends involving family members in daily operations as soon as possible.

 “Introduce them to bankers, attorneys and you know, other partners that are supporting your company,” Riley said. “All of this is based on the assumption that they want this, have earned it and are capable of it.”

The earlier planning begins, the better, said Cassidy Jakovickas, CEO of MBS Accountancy in Fresno.

“Start early with everything,” said Jakovickas. “Do things before you need to.”

“Always have your business ready to sell if you needed to,” he added.

Accountants help new owners select the right business entity and place a heavy emphasis on accounting systems.

Jakovickas says it’s important to acknowledge when a transaction is emotional — but to ultimately think through the process like an unrelated third party.

Jakovickas said that some people sell their business because it will yield optimal valuation. Business owners in this position might run out of ability or desire to grow the business.

Others sell the business before poor business conditions get worse.

“Business owners, especially small business owners, kind of pour their heart and soul into a business,” he said.

Jakovickas believes in leaving ample time to hand a business to the next generation.

“It’s not when the older generation’s out of steam. It’s when there’s plenty of time to hand this business over and still be able to mentor and coach,” he said.

Working with family can cause tension. Business agreements should always be done in writing.

 Attorneys Carl Refuerzo, Courtney McKeever and Anna Barcus Allen at Whitney, Thompson & Jeffcoach say that transparency and communication are essential.

“The current generation should discuss succession issues early and often. It is much easier to implement a succession plan while the founding or current generation is still around. Properly setting expectations is key to avoiding future family disputes,” said Barcus Allen.

Consulting with an estate planning attorney helps ensure the business interests are passed on in the most tax-advantageous way, she added.

 “Conflict and tension in a family business is unavoidable,” Barcus Allen said.

The common causes of conflict are miscommunication and the perception of or actual exclusion from business decisions, she said. Clear communication can establish each family member’s expectations at the beginning of the business venture regarding ownership percentages, company distribution, roles within the company and goals for the business.

Transparency is especially important with respect to finances and pivotal business decisions, said Barcus Allen.

Jakovickas and Riley both echoed that thorough planning is the key to successfully run and pass down the business.

“The succession plans that aren’t as well thought out and are rushed tend to be more emotional because you’re dealing with family, which is already a tough thing and then you mix that with business,” said Jakovickas.

In a well-thought-out succession plan, advisors help fine tune details. But when plans are hastily put together, advisors act as third-party arbitrators.

Going it alone would risk tax filing mistakes, said Jakovickas.

“You can outrun a lot of people by just being consistent and putting the time in,” Riley said.

Over-leveraging and taking on too much debt at one time is something to stay clear of, Riley said.

Barcus Allen recommends putting a shareholder employment policy in place to keep family and business relationships strong.

She has personal experience as a fourth-generation shareholder at her own family’s business, Sebastian, based in Fresno. Establishing a shareholder employment policy ensures that family members are qualified for the positions they take.

At Sebastian, all family members are invited to participate in a paid internship program in high school and college to understand how the business functions and become familiar with the employees and leadership team.

“To be eligible for a permanent position, family members must earn a degree relevant to the desired position and have several years of experience for that position with an outside company,” Barcus Allen said.

“Hold your family members accountable,” Riley said.

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