Handling a Family Business

Fairness isn’t always about equal shares — it’s often about what makes sense based on each person’s needs and circumstances. Sometimes one child needs more financial support or hands-on help. 

Other times, it’s about who’s better equipped to take the reins. At the end of the day, the goal is to land on a solution that allows everyone to feel they’ve been treated fairly — even if things aren’t split down the middle.

How do you determine what’s fair? 

In some cases, bringing in an outside perspective can make a big difference. A neutral third party — someone who understands both the business and the family dynamics — can help weigh in on what’s fair and reasonable. That kind of support can be hard to find, but it’s often worth it.

Common emotions behind a business transaction 

You’ve poured years into building your business. But now that it’s time to think about passing it on to your children, you’re seeing how complicated that can be. It’s not just about money — it’s about relationships, roles and emotions. 

You probably already know which of your kids could lead the business and which ones might struggle with that responsibility. To keep things from getting messy, create a clear, written plan that spells out your intentions and the steps you’ll take to make them happen. 

While it’s great to involve your kids in the conversation, it should also be clear that you’re the one making the final call. Everyone needs to understand and respect that.

What are the advantages of inheriting a family business? 

There are definitely some strong upsides for the next generation:

• They’re already familiar with the business.
• They’ve likely picked up institutional knowledge that can help them hit the ground running.
• The brand’s reputation is already built.
• Existing relationships with clients, vendors and the community are in place.
• Long-term employees are often loyal to the family, which helps with continuity.

What about the disadvantages?

It’s not all smooth sailing. Inheriting a family business can also come with these issues:

• Pressure to meet high expectations (especially from older generations)
• Challenges about who’s in charge and who gets what
• Lack of real-world business experience
• Inherited existing debt or financial obligations

Can a business inheritance be contested?

Yes, but only under specific legal circumstances. Just not liking the arrangement isn’t enough. Inheritance of a business can be contested if there’s a valid claim, such as:

• The person lacked the mental capacity to make the decision.
• Fraud, coercion or manipulation was involved.
• The will or trust wasn’t executed properly or in accordance with legal requirements.

What does estate planning involve? 

Estate planning goes beyond just naming who gets what — it’s also about structuring the transfer to reduce taxes and preserve the value of the business. A solid plan keeps more resources in the company and with your family.

What about inheritance taxes?

Some good news here: A number of states, including California, Pennsylvania, Kentucky, New Jersey and Nebraska, don’t require business owners to pay inheritance tax. In states that do, the amount typically depends on three things:

• Where the decedent lived
• How closely related the heirs are
• The overall value of the inheritance

Spouses often receive more favorable treatment, including lower rates or full exemptions.

How to avoid conflict about who will take over ownership of the family business

Conflict often happens when expectations aren’t clear. A defined succession plan goes a long way in preventing tension. If you can, gather the family for a retreat or meet on neutral ground to have these conversations. It helps set the tone that personal disagreements won’t interfere with the business.

If you’re passing the business through your will, your kids get a step up in basis to the fair market value at the time of your death. That can motivate them to take ownership seriously — especially when their own financial futures are on the line.

Another option is transferring ownership through a trust. This lets a trustee oversee any property that doesn’t go through your will. Here are some strategies to consider:

Unified credit/exemption trusts, dynamic trusts or annual exclusion trusts can reduce or eliminate estate taxes.

An estate freeze can lock in the current value of the business by converting it to preferred stock while transferring growth potential (common stock) to your heirs. Since preferred shares usually don’t appreciate, this strategy helps lower future estate tax liability.

Talk it out — now, not later

The more open conversations you can have now, the better. Addressing concerns head-on today can prevent resentment and confusion tomorrow. Every sibling is different — different personality, values and motivations. Some may want to grow the business; others may just want to cash out.

A team of professionals — your lawyer, accountant, financial planner, insurance adviser, maybe even a family business consultant — can help guide these conversations with clarity and care. Their job is to help protect your legacy and give your family the best chance of staying united through the transition.

© YC Partners 2025