The Ownership Circle
The Ownership Circle considers the management of wealth within the family business. Managing the ownership area of the business involves more than just minimzing taxes and protecting the wealth. This is the area that requires contingency and continuity plans, using such tactics as tax planning, estate planning and personal financial planning, to endure an equitable balance that is fair to both the individual family members and the business. Giving everyone an equal ownership of the business can cause conflict. It is not appropriate to put family members into ownership together when there isn't a common interest.
Look at what often happens with the family cottage. Gifting the cottage to all your children equally is a noble goal for most parents. However, it is a recipe for disaster if only some of the children have a real tie to the property. Those who don't have a tie to the cottage resent having to share in the responsibilities and costs, but at the same time aren't willing to give up on their share of the inheritance.
We advise against creating such golden handcuffs. Golden handcuffs happen when family members are locked into an ownership situation from which they can't escape. They feel obliged to stay. This can cause much distress.
Instead, families need to create a pressure release valve. There needs to be an exit strategy for those who wish to use it. Obviously, no one should make this decision lightly. Simply knowing that they have a choice is often enough to relieve the pressure or the fear of being locked in.
So within the ownership circle, strategies should be built on the premise of being fair and equitable with the family's combined assets. This will enable the parents to ensure that those who have an interest in the business are happy to have ownership while those who are not interested are given some other form of wealth. It is important that everyone can explain how they have been treated fairly.
Formality and structure are important to the ownership area. So we recommend an advisory board for this area of the business. Also an annual meeting of the shareholders is a very valuable addition to good communication in this area.
Click on the links below for more details.
Ownership/Outside Advisory Board
A communication and governance structure for dealing with ownership issues.
Annual Stakeholders' Meeting
A celebratory meeting that is open to all shareholders.
For information on the remaining areas of The SuccessCare®Program, visit the links below.
The Family/Personal Circle
The Management Circle
The 3-Circle Overlap