Wealth Allocation: Who Should Be Shareholders Of The Family Business?

A series for those journeying through family business succession.

Care must be taken in ensuring that the intent of all the shareholders in the family business is aligned with the family members charged with managing and growing that business. Failure to do so could break the family business apart.

Today, we step forward and consider directly why equal ownership may not be the best choice.

The point at hand is simple. If some of the shareholders are actively working in and managing the business, and other shareholders are merely passive equity holders, you have the potential for conflict. And, if not conflict today, then conflict as the families grow and age.

To ensure conflict does not arise between shareholders, families often elect that only family members working within the business can hold shares.

Whatever choice a family may make regarding the holding of shares, the underlying safeguard against conflict is the creation of a well-drafted shareholders’ agreement, including a governance structure, that will underpin equity, unity and a well-managed business.

#familybusinesssuccession #familybusiness

An Invaluable Resource — ‘Transition — Orienteering The Lands of Succession’

A Topographical Guide To Orienteering Family Business Succession

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