9 Reasons a Delaware Family Business Doesn’t Reach a Second Generation
You built a business with your name on it, and you’re hoping someone in your family keeps it running once you’re gone.
Hope alone has never run a family business.
These are the reasons a Delaware family business doesn’t reach a second generation.
Note: This is general information, not legal or financial advice. Succession, tax, and estate rules vary and are subject to change.
1. No Written Succession Plan
Your family business is coasting on hope alone without a plan for who takes over next.
Only 55% of business owners have put a succession plan in writing, according to a 2019 Wilmington Trust survey of privately held companies.
The other 45% are guessing, or assuming a spouse or an adult child will simply sort it out later.
Guessing isn’t a strategy.
A written plan forces you to name a successor, set a timeline, and spell out how ownership changes hands.
That’s the conversation you keep putting off.
2. Reluctant Owner
If you’re the owner, picturing anyone else running your family business might be the hardest part of all this.
Among owners without a transition plan, 78% said they enjoy running the company too much to start planning one, according to an earlier Wilmington Trust survey from 2017.
Even owners 65 and older, well past typical retirement age, often haven’t built a transition plan, that same survey found.
There’s always next year, until there isn’t.
Nobody wants to let go.
Every year the plan waits is a year nobody trains your successor and nobody finishes the paperwork.
3. Untrained Successor
Your family business can name an heir without ever training that person to run it.
A title teaches nothing.
Only 48% of family businesses are training or preparing a successor for the handoff, the 2019 Wilmington Trust survey found.
A separate survey of family-owned companies by the accounting firm Kreischer Miller found only 39% have a formal plan to develop future leaders.
Naming someone isn’t the same as preparing them.
A successor who’s never run payroll, sat through a bank meeting, or made a bad call and answered for it walks into the job blind.
4. No Business Valuation
Your family business leaves everyone guessing at what it’s worth if nobody’s ever had it formally valued.
Only 49% of family business owners have had their company professionally valued, the same 2019 Wilmington Trust survey found.
Without a number everyone agrees on, one heir assumes the business is worth far more than it is, another assumes far less, and the argument starts before anyone signs anything.
Nobody wins an argument built on a guess.
Get a number instead.
A professional valuation costs a few thousand dollars against a business that might be worth millions, and it settles the argument before it starts.
5. Equal Shares, Unequal Work
Your family business often ends up owned in equal shares by children who put in very unequal amounts of work to keep it running.
One sibling spends twenty years behind the counter, and the other checks in twice a year.
An estate plan that splits ownership straight down the middle treats both the same.
Estate and business advisors have a name for this: The equal-versus-equitable trap.
They see it derail transitions again and again.
Equal isn’t always fair.
The sibling who ran the business resents writing a check to the one who didn’t, and the one who didn’t resents being told they aren’t entitled to a full share.
6. Unmanaged Family Conflict
Your family business runs on relationships that don’t reset when the workday ends, so a personal fight follows everyone back to the office the next morning.
The same Kreischer Miller survey found family dynamics and interpersonal issues named as an obstacle to succession planning by 15.8% of respondents — the same share that named time constraints and day-to-day pressures.
That’s not a small problem.
A disagreement over who gets more control, more credit, or more say doesn’t stay contained to holidays.
It shows up in your Monday meetings, and eventually in who still wants to come to work at all.
7. Estate Tax Cash Crunch
Your family business is often worth more on paper than the family has sitting in a bank account.
Delaware repealed its estate tax in 2018, so residents don’t owe the state a cent on an inheritance.
The federal government is a different story.
You can’t wait for cash.
The 2026 exemption is $15 million per person, and the federal government taxes a business worth more than that on the difference at rates up to 40%.
The estate tax return and any tax owed are due nine months after the owner’s death, not whenever the business happens to sell.
Much of that value sits in the building, the equipment, and the inventory, not cash.
That gap is why some families end up selling off pieces of a business that had never been listed for sale on the open market.
The Installment Option
Your family business can qualify for a slower payment schedule when it makes up more than 35% of the owner’s adjusted gross estate.
That’s the estate’s value after debts, funeral costs, and administrative expenses are subtracted.
That option comes from a federal tax rule enforced by the Internal Revenue Service, called Section 6166.
Instead of one lump sum within nine months, the first installment of the tax itself isn’t due for up to five years.
Interest on the deferred amount is still due every year during that window, and the rest is paid annually after that.
It’s not automatic, and an executor has to elect it by the filing deadline.
But it exists so your family doesn’t have to sell the business just to cover the tax on it.
8. Unplanned Death
Your family business can decline fast when the person running it dies without warning.
One widely cited study out of Norway that tracked hundreds of privately held companies found sales fell by as much as 60% within four years of an owner’s death.
Employment at those companies dropped as much as 17% in that same research, and the firms were noticeably more likely to fail than similar businesses whose owner was still living.
You can’t plan your death.
Your business still has to survive without a leader anyway, whether anyone planned for it or not.
9. Deadlock Problem
If your family business is owned equally by two or more siblings, there’s no built-in tiebreaker when they disagree.
Many states’ default corporate and limited liability company laws only step in after a dispute reaches a courtroom.
The usual remedy a court reaches for is dissolution, not the compromise your family would choose.
In Massachusetts, for example, a business with no written agreement covering a deadlock can end up in front of a judge.
That judge decides whether to shut the company down, according to legal analysis of the state’s corporate law.
Silence isn’t a plan either.
Saying nothing doesn’t keep the peace — it just moves the decision to someone outside the family.
Psst! How much do you know about Delaware’s business history? Take our quiz and see how many you can get right.
Quiz
Family Business Trivia
Answer these questions on Delaware business history and family firms nationwide. We bet you can’t get them all right. Prove us wrong?
Wilmington Trust was founded in 1903 by a member of which famous Delaware family?
The DuPont Exception
You rarely see a family business get the chance to prove what's possible when everything goes right, but the state's most famous company did exactly that for more than a century.
DuPont started in 1802, when Éleuthère Irénée du Pont built a black powder mill along the Brandywine Creek near Wilmington.
A member of the du Pont family led the company every year from that founding until 1940, a stretch of 138 years, according to the company's recorded history.
It's the exception.
You can borrow the pattern for your family business, size aside.
The company didn't survive because nothing ever went wrong.
It survived because the family kept training the next person before the current one left, generation after generation, until professional managers finally took over from outside the family.
17 Trivia Questions Stumping Americans Across the Nation
Many Americans get more of this wrong than they'd guess, from where the Pilgrims landed to who discovered the continent.
Some of the questions expose myths that have been passed down as fact for generations, and even people who think they know their history miss more than a few.
