This post is by my colleague, Sodoma Law attorney John C. Woodman.
Following the Presidential election, there has been much discussion of what President-Elect Trump will do regarding his considerable business interests. He has stated that he will place three of his adult children in charge of his business empire - not an easy task. There are many American family business owners who can relate, albeit most of them on a far smaller scale.
Similar to President-Elect Trump, said business owners face the reality of how - if - and when to transition their business. Sure, the complexity of Mr. Trump's transition is in a league of its own, but such a transition brings to light the reality that all family business owners will inevitably face when leaving their business to their children. While every business transition is different, keeping these three guidelines at the forefront will Make "Transition" Great Again... (i) Involve, (ii) Integrate, and (iii) Invest.
Involve
As far as one can remember, well before Donald Trump ever made his desire to pursue the White House known, it was evident that his children were heavily involved in the family business. The reason for such heavy involvement was probably not the thought of a possibly Presidency, but an overall proactive approach to his business affairs. Thus, involving the next generation of leaders in the business produces a greater likelihood that the transition will be smoother, ultimately helping the business owner's legacy to be a positive one. Moreover, dependent upon the compensation associated with the transition, if any, the smoother the transition the greater financial return. For example, should the transition merely be the day-to-day operations, such as the scenario proposed by Mr. Trump, the success of the company still directly impacts the exiting owner's net worth. Involving the new leaders early and often will decrease the chances that the company's overall worth would be negatively impacted by the departure of key personnel such as the business owner.
Integrate
Depending on the size of the business, the policies and procedures that have been implemented for years should be integrated across the board from department to department, and business to business. While elementary in principal, such a small step can ensure that with the exiting owner's departure, the next generation can focus on the growth of the business and not the minutia. Any transition is going to have its bumps in the road, but bulletproofing the simple matters by way of integration, will clearly aid in minimizing the unknown for all parties.
Invest
Over the years, in order to grow a successful business, business owners such as Mr. Trump have not only been the recipient of good fortune but have also invested time, energy, and finances into their business. As I imagine is the case with Mr. Trump's pending transition, a majority if not all business owners would likely look back and be satisfied with the amount they invested into the business whether it be money and/or time. In the time of a pending transition, the amount of investing should not decrease. First and foremost, setting up for success for the next generation is directly impacted by the investment of the exiting owner's time, strategies, skills, and the like. Recent reports state that Mr. Trump's calendar is not only full with selecting his Cabinet, but also has time blocked out in order to discuss with his children - the next generation of leaders in the Trump empire - specific business wisdom and tips, stories full of successes and failures alike, and identifying particular relationships to cultivate and others to bury. These paramount conversations can only occur if the exiting owner invests their time in the next generation. In addition to the investment of time, exiting owners must invest the necessary financial resources in safeguarding a smooth transition. These financial resources can be furnished for the necessary legal documentation, whether it be acquisition contracts, buy-sell agreements, resolutions regarding the exiting owners departure, and/or the proper notification to the pertinent governmental agencies. Furthermore, properly utilizing the necessary financial resources will create the appropriate legal protection for all involved in the transition.
All transitions in life can be difficult...business transitions are no different. However, involving the next generation as early as possible, integrating the same policies and procedures across the board for consistent measures and investing the necessary time and resources will assist in the continued success of any business through the next generation.
John C. Woodman is an attorney with Sodoma Law, P.C., based in Charlotte, NC. His areas of practice include business litigation, creditor/debtor rights, and corporate law. He is a member of the American, North Carolina, and Mecklenburg County Bar Associations.