Addressing ownership and sibling partnership across generations

Watch the Schoedingers, a 6th generation family business operating Schoedinger Funeral & Cremation Services based in Ohio, USA, describe how transitioning the family business across many generations requires working on sibling and cousins relations while ensuring proper ownership structures.

<strong>Jay Schoedinger</strong> Our business started around 1855. The oldest document that we have to prove its age is a bill for a funeral service from 1857. Less than 50% of the family owned businesses make it to the second generation, and here we are on the 6th. <strong>David Schoedinger</strong> We have never had a real succession plan. People ask, you know, how have you been able to get through six generations when most businesses, maximum are three generations. The best reason is we always had a mandatory buy-sell. It has always until this generation, until the 6th generation, it has always come down to two brothers. And if one of them died, the other had to buy the other one out, so there were no widows getting stock in the company. <strong>Michael Schoedinger</strong> We have been very “clean” for five generations where it was just two brothers. And my generation is the first where it is not two brothers. It is two brothers and a cousin. I think the more family members you have, the more complicated it gets. <strong>David Schoedinger</strong> We have grown the business so much, my brother and I gifted our share of the company in GRATS, grantor retained annuity trusts, and we recapitalized the company at one hundred to one voting to non-voting stock. <strong>Michael Schoedinger</strong> I commend my father and my uncle for doing that. I mean, they saw that this company is too big to just have the next generation buy shares of stock with after tax dollars. It just would be very tax inefficient. And they used their gifting abilities with the tax laws to really pass this whole company down with very minimal impact. <strong>David Schoedinger</strong> We did them on three, six, nine, twelve, and fifteen year GRATs, and the last one expires here in June 2013. They will have the entire business pass through. <strong>Michael Schoedinger</strong> To do that we had to do it differently. We had to allow non-working family members to become stockholders, and that is something that had never happened before. So, they do not have voting stock. We were able to do it with non-voting and voting stock. So the value of the company has been passed down to my generation and gotten out of the estates of our senior generation, but the control of the company still stays within the working Schoedingers here. <strong>David Schoedinger</strong> Hopefully it will pass on to another generation who can earn a nice living. I trust the next generation will know what to do.