In light of the Great Resignation, many workers—including high net worth individuals—are leaving full-time careers to start their own businesses. The entrepreneurial lifestyle impacts more than just the founder; when starting a company, one must consider how their decisions will affect their immediate family and the wealth thereof. The early days of a company’s founding and growth are undoubtedly chaotic, but they also present a key opportunity for the founder to conduct in-depth estate planning. Why play catch up later on, when you can build a strong foundation from day one?

Financial advisors are in a unique position to support their clients as they found companies. Financial advisors can help guide clients toward prudent, long-term decisions, even during the most chaotic early days of the founder's journey. Smart estate planning at the outset can help with the success of a new business venture, as well as securing the ultimate goal for high net worth individuals: a well-rounded plan for protecting and preserving their family’s legacy.

From Family Planning To Family Business
Financial advisor teams are uniquely positioned to work hand-in-hand with clients to align business goals with personal goals. Financial advisors bring a unique perspective as a family consultant and savvy business strategist. An estate plan that takes both sides into account is the critical foundation for long-term success.

Financial advisors can assess how families will need to reevaluate personal goals and immediate plans to accommodate new business plans, while keeping family values at the forefront. Having values-driven conversations with clients is an excellent strategy for aligning the professional with the personal, as both areas should be guided by a governing set of principles. Keeping those values at the forefront of planning conversations can help clients find clarity in chaos.

If your client hasn’t articulated their personal or professional values yet, ask them if they’d be open to a qualitative conversation around values. Ask questions to draw out what your client already knows intuitively but perhaps hasn’t been able to articulate, like, “What drove you to start this business?” “Which of your personal values will be reflected in how you run this business?” “What lessons did your parents teach you that you want to pass on to your children after you’re gone?” The answers should start to paint a picture of the legacy your client wants to leave. That is the root of a strong estate plan.

The financial advisor's relationship with the client is critical in this situation: Rather than start from scratch with a new team, as some clients may be prone to do, it can be invaluable for business founders to leverage established relationships with financial advisors when starting a new business, especially when it comes to incorporating personal plans with that of the company.

Shifting From Qualitative To Quantitative
Once values are determined and goals are aligned, the financial advisor's role becomes more technical.

A family business succession plan can look similar to the family’s personal succession plan--but the factors to consider are very different.

If the goal is to pass the business ownership and management to family members, a succession plan may include gifts of equity (outright or in trust, considering tax efficiency) or bequests of equity at death along with a liquidity plan for estate taxes.

Coach clients to consider the allocation of equity among family members. Will each child inherit an equal share? Is each child’s involvement in the business going to impact the equity allocation? Encourage clients to address family conflicts that may arise based on shared ownership. If the goal is for employees to continue the business, plan as far in advance as possible, prepare the company for transition, and consider financing options and tax consequences.

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