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It's important to have a plan for transferring a family business

Some reports cite that there may be as many as 5.5 million family-run businesses in the United States. It's estimated that these corporate entities contribute just over $8 trillion to the American economy each year.

This equates to at least 57 percent of this country's gross domestic product. These companies hire as many as 63 percent of all American workers. They're also responsible for 78 percent of all new jobs created.

Despite the success that small business seemingly have in the United states, the director of Loyola University's Family Business Center notes that only 30 percent of these family-run ones are ever continued by a second generation family member. She notes that, in at least 47.7 percent of all cases, a business dissolves as soon as its founder passes away.

If one does get passed on to the second generation family member, it virtually never gets passed on a third or subsequent one.

She notes that it's a shame family businesses die off so often and that they don't have to. She emphasized how they often have some of the most committed shareholders, in part because they're small businesses that are tight knit. Their lower capital costs tend to increase shareholder value as well.

In her experience, she notes that business owners tend to think of themselves as immortal so they fail to think about what happens with their business, their employees and their mission after they're gone. She notes that families tend not to sit down and discuss who will continue on a company's legacy either.

Instead, she says that oftentimes, when these companies do continue to operate after their founder's death, it's because they're bought up by private equity firms. She notes that when these types of companies take over, they often lose that personal feel that comes with a family member having grown up around the business.

As a final commentary on the family businesses, she noted that those who are looking to continue to exist across generations can benefit from appointing a board of directors and drafting a strategic plan for the future.

If you're looking to gain a better understanding as to what's involved in succeeding a business to a family member, then a St. George attorney can advise you of what to do to ensure that happens.

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