AN INTRODUCTION TO GRAY PLANT MOOTY S FAMILY BUSINESS ADVISORY TEAM AND A HEALTH CHECK FOR THE FAMILY BUSINESS

Transcription

1 AN INTRODUCTION TO GRAY PLANT MOOTY S FAMILY BUSINESS ADVISORY TEAM AND A HEALTH CHECK FOR THE FAMILY BUSINESS

2 FAMILY-OWNED BUSINESSES Gray Plant Mooty s Family Business Advisory team is a multidisciplinary group of lawyers that shares experience, expertise, and a passion for helping its clients address the variety of legal issues facing their family-owned businesses. We know that family-owned businesses are unique and that a keen understanding of the interplay between business and family is critical to helping you proactively address your legal challenges. Our attorneys combine their resources in a uniquely collaborative way to help families and businesses thrive. Our family-owned business clients seek advice and we counsel them in a number of areas of law that affect them, including: Planning for management succession, changes in ownership, and control Identifying company and shareholder cash needs and advising on liquidity Structuring acquisitions, joint ventures, strategic alliances, and sales of businesses Counseling on family estate planning issues, including minimization of taxes Advising on business structures, control techniques, and distribution of shares Counseling on family disputes, deadlocks, and other shareholder planning issues Managing compensation programs for both family and nonfamily members Designing retirement plans and deferred compensation plans Advising on issues relating to labor and employment matters, including personnel problems Advising on issues involving non-active family shareholders Evaluating existing family trusts Establishing shareholder communication and developing the owners common sense of purpose Counseling on federal and state tax matters Advising on federal and state securities laws Counseling on antitrust and environmental matters

3 HEALTH CHECK FOR THE FAMILY BUSINESS The following is a quick health check for the family business. If you answer no to any of these questions, we suggest you contact a member of GPM s Family Business Advisory team to assist you. Yes No Succession Issues Have the owners identified their succession goals? Is there a buy-sell agreement? Has the buy-sell agreement, especially the method to value ownership interests, been reviewed in the last five years? Is there a funding mechanism to ensure the buyout can be made? Do all the business owners have estate plans? Have those plans been reviewed in the last five years? Is there a plan to minimize the estate tax liability upon an owner s death? Is there a succession plan for transition of the business upon the owners retirements or deaths? Does everyone involved in the business know what will happen and what to do upon an owner s unexpected death or disability? Do the estate plans, buy-sell agreements, and succession plans work together to achieve the owners goals? Have mechanisms to get cash flow to the owners upon retirement been considered? Do the owners have a vision for their post-retirement lives? If the transition will be to children, have the needs and roles of the active versus inactive children been identified and provided for? Have the needs and roles of non-family-member management been considered?

4 Yes No Corporate Issues Has the company had recent meetings of its board and owners? Are minutes up-to-date for meetings of owners and directors? Have officers and directors been recently advised of their fiduciary duties to the company and its owners? Does the company have any outside directors? Does the board understand its responsibilities and appropriate roles, particularly to the owners and to the managers? Is there an up-to-date strategic plan in place for the business? Does the company maintain an up-to-date capitalization summary? Does the company maintain a stock ledger or its equivalent? Has anyone helped the owners assess the value of the business? Do the owners agree on the value of the business? When the company issues ownership interests, does it make sure that it complies with the applicable federal and state securities laws? Has anyone assessed the advantages and disadvantages of selling the business versus keeping it? Employment Issues Does the company have noncompete and nondisclosure agreements with key employees? Has the need for key person insurance been discussed? Do key employees know what their roles will be upon an owner s death, disability, or retirement? If owners work in the business, are they aware that their employment is at will? Are the proper incentives in place to encourage employees to contribute to the success of the business?

5 If family members work in the business, are their roles, responsibilities, and reporting relationships clearly defined? Is there a family employment policy? Is it enforced? Do family-member owners who are not employed in the business know how and under what circumstances they can draw value out of the business? Are non-active family member owners clear about their expectations of the active family member owners? Do non-family-member employees feel secure in the knowledge they are important contributing members of the organization? This list is a sample of the kinds of questions we ask to determine the health of the family business. Questions may also be asked in the areas of real estate, employee benefits, financing, and litigation prevention, to name a few. QUICK FACTS Number of family-owned businesses in the United States: 17 million Family businesses constitute 90% of all businesses in the United States Family businesses generate 64% of the gross domestic product in the United States Family businesses create 86% of all new jobs in the United States A total of 37% of Fortune 500 companies and 35% of the S&P 500 firms are family controlled Sixty percent of all publicly held U.S. companies are family controlled Family businesses outperform non-family businesses in the United States by 6.65% annually in terms of return on assets About 30% of family-owned businesses survive the transition from the first generation to the second About 12% of family-owned businesses survive the transition to the third generation Please contact your existing GPM attorney or Family Business Advisory team cochairs: Sally Stolen Grossman Michael P. Sullivan Jr. sally.grossman@gpmlaw.com michael.sullivan@gpmlaw.com Gray Plant Mooty. You may not copy or distribute any part of these materials without Gray Plant Mooty s permission, except as permitted by copyright law. Please direct any requests for permission to copy or distribute these materials to Sally Stolen Grossman or Michael Sullivan Jr., at Gray Plant Mooty.