The challenges that family-owned business face – from just starting out to transitional issues in a multi-generational business – are much different than any other type of business. Hiring practices become more complex with family members on the payroll. Discussions about business continuity point to the need for succession planning. Most importantly, when you bring your family into the business, financial planning involves not only the corporation’s assets, but those of the family.
With proper planning, many family businesses possess the right components for tremendous success – shared values, common goals, and a certain tolerance for risk. There are several financial and accounting issues that family businesses must consider in order to achieve success and sustainability. These issues include, but are not limited to:
- Accounting and Assurance. Many family businesses choose to outsource their bookkeeping and even CFO responsibilities. It is also imperative to have proper cash management, budgeting and revenue forecasting to ensure business success.
- Estate and Succession Planning. Proper succession planning is essential to create a family business legacy and businesses often require an outside advisor or mediator to facilitate a plan.
- Entity Structure and Set Up. Should your family business be structured as a corporation, a limited liability company, or a partnership? This legal structure has implications for your personal financial liability, taxes, and more.
- Fraud and Embezzlement. Family businesses are not exempt from corporate fraud and often need forensic services to investigate embezzlement and recoup losses.
Other common accounting issues and needs include operational audits (to reduce costs), tax compliance and planning, and creating deferred compensation plans, among others.
It is imperative for family businesses to identify trusted advisors to help create business structures and policies that will encourage profitability, growth, and compliance. This will protect not only the businesses assets, but the family’s assets, as well.
