Family Business Matters       09/30 04:58

   How to Prepare for the End of Your Business

   Chances are that somewhere in your future, your business will experience an 
ending, split or dissolution. Being prepared can be instrumental for positive 
family relationships.

Lance Woodbury
DTN Farm Business Adviser

   As history goes, the United States is a relatively young nation. A farm or 
ranch operating in America today, even if the owners have generations of 
consistent family ownership, is the result of someone starting anew. They left 
something else -- a job, another business or possibly another country. Every 
business beginning involves some type of ending.

   Family companies rarely stay the same over time. Some people choose not to 
return to the family business. Some businesses get sold, split up or merge. A 
business division may occur due to participants' diverging goals, or there may 
be conflict between partners or their spouses. Some may simply desire more 
freedom to operate on their own, or they might want a wholesale change in their 
career.

   Whatever the reason, the chances are that somewhere in your future, your 
business will experience an ending, split or dissolution. You may not want to 
think about the inevitability of an exit, but being prepared can be 
instrumental for positive family relationships. In many cases, thinking early 
about the ending, well before it occurs, may help reinforce the reasons to stay 
together.

   Several activities help prepare for an eventual but successful ending or 
division of the business.

   First, if you are in a partnership, review your legal agreements to 
understand the transfer or buy-sell provisions. Some entities don't have an 
agreement for how people get out of business together, while many others have 
terms not reflective of owners' current intentions. Those terms govern unless 
the owners agree to an alternative. The time to review the agreement is before 
anyone expects to exit.

   Second, assess the quality of your financial records. Maintain a current 
income statement and balance sheet to model different revenue, expense and 
ownership scenarios. Discuss asset values at regular intervals to foster an 
understanding of the business' value. Understand the capital gains, deferred 
income or negative tax basis implicit in your balance sheet. Visit with your 
accountant to understand your current financial condition.

   Third, consider what might comprise one, or several, economically 
sustainable units. If the business or land is split, can there be two or more 
smaller businesses that still support a family? I've known several families who 
purchased assets knowing they might someday be spun off to partners who go 
their own way.

   Fourth, contemplate what assets are not considered core to the operation. If 
a buyout or division becomes a reality, those assets can be used to facilitate 
a transaction, becoming a source of cash or capital for the deal.

   Finally, stay in communication about each person's goals and plans. What are 
family members' aspirations for the future? Does a partner plan to retire? Move 
to a different geography? Sometimes a business split offers the necessary 
permission to change.

   Splitting up, winding down or selling a business is seldom easy, but an 
ending is sometimes necessary for the relational health of the family and the 
mental health of the participants. Talking about an eventual business ending 
now may help you be a better family later.

   Lance Woodbury can be reached at lance.woodbury@pinionglobal.com




(c) Copyright 2025 DTN, LLC. All rights reserved.