How Can You Manage Family Conflicts in Business Succession Planning?

Family-owned businesses are at the heart of Illinois’s economy. From small professional firms in Naperville to large family enterprises in DuPage County, these businesses often represent decades of hard work, sacrifice, and wealth-building. But one of the hardest challenges a family business faces is planning for leadership and ownership when the current generation steps aside.

Business succession planning is not only about transferring shares and titles. It is also about navigating family relationships, addressing competing expectations, and preserving harmony while protecting the business itself. Without careful planning, family conflicts can derail succession, harm profitability, and even lead to lawsuits.

At Gierach Law Firm, our Naperville business law attorney has more than 30 years of experience helping family businesses design succession strategies that avoid conflict and protect companies. We will discuss your goals and create a plan customized for your business and family.

The Start of Business Succession Planning Can Cause Conflict

When a family business owner begins succession planning, things can get rough. Children may have different levels of involvement in the business, different visions for its future, or long-standing rivalries that influence decisions. Spouses, siblings, and in-laws may also have opinions, which can make things very difficult, to say the least. 

Some of the most common sources of conflict include:

• Unequal participation: One child has worked in the business for decades, while another pursued a different career but still expects an equal share.
• Perceived favoritism: Parents prefer a particular child for a leadership role, creating resentment among siblings.
• Different risk tolerances: One family member wants to reinvest profits aggressively, while another prefers a conservative approach.
• Blended families: Second marriages and stepchildren can create additional complexity in determining heirs and ownership.
• Lack of strategy: When business owners delay succession planning, family members often make assumptions about their roles, leading to disappointment and conflict later.

Without a plan, courts may decide how shares are distributed through probate, often in ways that fracture families and damage businesses. This can be avoided with careful succession planning. 

Setting Business Succession Goals and Priorities

The best way to avoid family conflict is to begin succession planning early, being as clear as possible about what you want and why. Business owners should start by clarifying their own goals. Do you want the business to remain family-owned? Are you open to selling it to outsiders if no family members are prepared to take over? Would you prefer one heir to take control while others are compensated in different ways?

Defining values also matters. For example, you may want to keep the company in Naperville, protect jobs for loyal employees, or protect a certain reputation in the community. When these priorities are clearly communicated, it is easier for family members to understand decisions, even if they do not all agree.

Setting Up Clear Roles and Responsibilities in Business Succession Plans

A common source of family conflict is uncertainty about who is responsible for what. By establishing clear roles before the transition, you can prevent arguments and confusion. This may include:

• Written job descriptions for family members involved in the business
• Clear standards for hiring and promotion to prevent claims of favoritism
• Defined decision-making authority so one person is not undermined by another

For example, if two siblings will co-manage the business, you might specify that one oversees operations while the other handles finances.

Ownership vs. Management in Succession Planning

One of the most important distinctions in business succession planning is separating ownership from management. Family members who inherit shares do not necessarily need to run the company. In fact, it is often better to allow non-active family members to remain as owners while active participants manage the business professionally.

Tools such as family trusts or voting agreements can balance these interests. For example, one child may own shares and receive dividends, while another child manages the company and draws a salary. This structure allows everyone to benefit financially without constant battles over day-to-day operations.

Should You Have a Buy-Sell Agreement in Your Business Plan? 

Under the Illinois Business Corporation Act, 805 ILCS 5/7.85, shareholders can enter into agreements that restrict how shares are transferred. For family businesses, this can include buy-sell agreements that prevent shares from being sold outside the family, reducing the risk of future conflicts.

A buy-sell agreement can specify who has the right to buy shares if a family member leaves or dies. It can also set how the price of shares will be determined, or whether shares can be sold to outsiders or must remain within the family.

For example, a Naperville family business might use life insurance to fund a buy-sell agreement, ensuring that if one sibling passes away, the other can buy their shares without draining company resources. This prevents in-laws or distant relatives from suddenly becoming shareholders, which often triggers conflict.

Managing Taxes and Probate Risks in a Business Succession Plan

Illinois business owners need to consider state and federal estate taxes, not only now but into the future. As of 2025, the Illinois estate tax applies to estates worth more than $4 million. Without planning, your heirs could face significant tax bills that force them to sell parts of the business.

Succession planning tools such as gifting shares during life, creating family limited partnerships, or using grantor-retained annuity trusts can reduce these risks. These tools also make transitions smoother by gradually transferring ownership, rather than leaving everything to be decided after death in probate court. Slowly transferring ownership also allows these changes to be made more comfortably, with explanations accompanying each change. 

Contact a Naperville, IL Business Succession Lawyer

If you own a family business, now is the time to get ready for the future. There is no reason to leave your loved ones exposed to conflict, taxes, or confusion. At Gierach Law Firm, our Naperville business law attorney has more than 30 years of experience guiding families through succession planning and other difficult business law issues. Call us today at 630-756-1160 to schedule your consultation and begin building a plan that protects both your company and your family.