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Passing the family business to your children when only one works in it
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Overview
One child may want to run the business while another wants a fair share of the family’s wealth. Compare who will make decisions, who will own the assets and what income the parents need to retire.
Put the assets and people on one page
One daughter has run the workshop for six years. Her brother lives interstate and has no plans to join. Their parents would like to treat them fairly and still draw enough income to retire. Dividing the shares in half may look simple. First, the family needs to decide who’ll run the business, who’ll own it and how everyone gets paid.
Draw a map of the trading company, the building it operates from, any trusts, loans and personal guarantees. Write down who owns each asset and who can make decisions about it. Then ask each person, separately if they prefer, what role they actually want. A child keen to manage staff might be less keen to take on a loan to buy shares.
For example, the parents might plan to keep the workshop premises and lease them to the business. Model the rent from both sides. Is it enough to support the parents, and can the business afford it in a quiet year? Put a possible buyout alongside that option so the family can see how the risks and timing differ.
Test the handover before signing it
Choose a date for the next generation to take over day-to-day decisions. List who can approve payments, deal with lenders and sign new work. Have the solicitor review wills, trust deeds and shareholder arrangements, and ask your accountant to check the tax and cash impact of any transfer before you commit.
