The Importance of Family Businesses
We all know the topic from numerous books, movies and TV series. Thomas Mann’s “Buddenbrooks”, HBO’s “Succession” or books about real business families such as the Krupps or Henkel – the rise and sometimes also the fall of these families, their companies and the personal fates associated with them fascinate and move a large number of people.
Whereas some publications just serve the peoples sensationalism (Thomas Mann excluded) the real part of the fascination with family businesses lies in the fact that they are actually an essential part of many people’s lives. Family businesses are part of families. Around 1.9 million people in Austria are employed in family businesses. The owner family usually has a decisive influence on both social and political issues in the region in which it operates.
Numerous charitable projects are initiated and supported by family businesses. Family businesses assume responsibility far beyond their companies, for the families of their employees and for the region, and thus represent an important backbone of the Austrian economy.
It must be acknowledged that family businesses are such attractive employers and business partners precisely because the owner family represents a stable constant with handshake quality that is also willing to assume responsibility and which actions are strongly based on values.
The successful handover
In the coming years, more family owned companies will be handed over than ever before. Also, the fact that Austria currently does not levy gift or inheritance tax encourages the transfer of family assets.
Austria provides for several corporate options to structure family businesses. Depending on size and owner family partnerships, companies with limited liability or even private foundations may be a suitable solution. Such corporate structures may be supported by a family-charta or family boards in order to safeguard that the family’s principles remain recognized in strategic business decisions.
If we now consider that, in addition to the question of who should take over the company, family businesses also have to decide how the values and ideas that have historically grown in the company, which have made the company what it is, which have virtually created the company’s own, family DNA, should be continued and lived by the next generations, the question of a “successful handover” quickly reaches a level of complexity that goes beyond questions of corporate law and taxation.
The family dialogue
The good news is that one can trust that despite the complexity of these issues, the owner family itself knows the answers to these questions best.
Indispensable to this is the willingness for an open dialogue about the possible structuring of a succession within the family. Within this dialogue the family can exchange ideas about common values and goals. The next generation is called upon to contribute its ideas and wishes just as much as the handing-over generation. In the best case, old and proven ideas should be complemented by new ones to form a future-proof whole.
One product of such an exchange can be a family constitution, which represents a kind of morally binding intergenerational contract. Another product of such an exchange can be the assignment to a lawyer and tax advisor to examine and implement the very structuring desired by the family.
The great advantage of this approach is that the family members involved will be much more accepting a solution worked out independently in this way than a solution presented to the rest of the family by one family member’s advisor.
Of course, an experienced advisor can assist families in drafting a family constitution and/or structuring a succession plan. However, such a consultant should by no means act in an advisory capacity, but should be the facilitator of a constructive and thus value-creating dialogue within the family.
There is a reason why family businesses have been so successful and innovative for generations – each owner family was able to find its own unique way to success. This fact should give trust in the succession structuring process and shall also guide and strengthen the next generations.