ALL IN THE FAMILY

Once the personal shock of Bob Gripentog's death in an ultralight plane crash 16 years ago began to wear off, the shock to the business he built began to take over. Although the Las Vegas Boat Harbor on Lake Mead and its related entities were transferred smoothly to his widow, Betty Gripentog, the family realized it had not prepared for a generational transition.

"We really got an eye-opener about how little we had done in this area when dad passed away," said Bob Gripentog Jr., one of four members of the second generation now running various parts of the business.

Since then, the family has taken steps to pass ownership to the four members of the second generation -- Betty Gripentog is still active as the president at age 78 -- in the orderly way that countless business advisers recommend, although that may not be enough.

"We're still worrying about it," said Bob Gripentog Jr., the general manager who runs the marina. "Anytime the government can take 50 percent of your business in taxes, it's pretty hard to deal with."

As much as family-owned businesses have been romanticized over the years as the backbone of the economy, backed by volumes of research to quantify the impact, issues such as those the Gripentogs faced drive home the fragility of family ownership. According to the magazine Family Business Review, fewer than one-third of family-owned companies survive to the second generation and only 12 percent make it to the founders' grandchildren.

"It is an ugly sort of picture," said Janet Runge, with the Center for Entrepreneurship at the University of Nevada, Las Vegas. "Families do a remarkably poor job of dealing with transition issues."

Several surveys track the growing number of ownership changes expected in the next few years as baby boomer founders retire. Experts in the field tick off a broad spectrum of questions that family owners/managers must answer to keep the business intact, including:

•How to divorce the living room from the boardroom to keep emotions from interfering with profits, and on which side is it most important to maintain harmony.

•How to divide ownership among different family members, whether equally because of blood ties or in differing amounts according to ability and interest in a business.

•How to choose leadership, by seniority or merit.

•When the incumbent generation should step aside and how far away should they distance themselves from decision-making after retirement.

•What type of legal structure makes sense in order to minimize taxes upon transferring ownership.

• How often a succession plan should be revisited.

"When you see a succession that doesn't go well, it is quite often due to a general lack of planning," said Jodi Waterhouse, director of the University of San Diego's Family Business Forum.

However, experts stress that taking into account the factors of succession, some of which may conflict with each other, makes off-the-shelf solutions impossible.

"I will sit down with mom and pop, understand what they want and tailor make a plan for each one," said attorney Kenneth Burns of the law firm Kolesar & Leatham. "I become as much a family counselor as legal or business counselor."

From there, estate planners recommend numerous techniques to minimize taxes or pass equal value to children. These can include: trusts for stock, insurance policy trusts to pay for taxes, provisions to fund inheritances, splitting up stock, concentrating voting power in the hands of managers or buy-sell agreements that spread the price for buying out interests over several years.

Adding a potential layer of complication, family businesses tend to grow more slowly and conservatively than other types, so that a business that provided a good income for mom and pop may be stretched thin for three siblings or seven first cousins.

Finally, even carefully crafted plans can crumble without the will or acumen to carry them out.

"This is the sort of stuff that is easy to talk about or go to a seminar and hear about," Runge said. "But it's a lot harder to pull it off."

Against that backdrop, communication comes to the fore, not only for what the incumbent owners want for the future but also the basics of how the business operates and what shape it is in.

"You don't want a situation where the next generation has this monster landing in their laps and they are left scrambling to figure out how to run it," Waterhouse said.

For some, transitions have come relatively easily. Broker Frances Cox had been with Golden West Real Estate for more than three decades when her partner died in early 2005. Rather than get entangled with estate issues, she chose to shut the business down and reopen her own USA Real Estate and Property Management Team the same year.

The lack of any retirement fund from Golden West and a desire to set up her daughters financially motivated her actions. She split ownership of USA equally with her oldest daughter, Donna Lombard, and brought her youngest daughter, Trina Stanfield, on board as an employee.

"I'm 62 now, and I plan to stay at the helm for another five years to build up the business, then turn the reins over," Cox said.

In doing so, Lombard will wind up with majority ownership and Stanfield will get an interest. Cox will retain about 25 percent, with the share of income from it effectively becoming her pension.

"We've talked about it, and they are fine with it," she said.

In more classic fashion, John Fish put all of his five children to work in the family jewelry store when it opened in 1955.

"I remember taking apart my first watch when I was 9 years old," said son Stephen Fish. "Of course, I couldn't put it back together."

But the elder Fish did not leave his shop's future to chance. He set up trusts for the children in the 1980s, although controlling interest has remained with his widow, Elaine.

But loose ends remain. Stephen and his brother, John D. Fish (not a junior), have worked full time at the store on East Sahara Avenue, but their one other brother spends most of his time on a computer business. Their two sisters have not participated in store operations since the 1980s.

"We have all cooperated for many years now," Stephen Fish said.

But they would probably have to negotiate a purchase over time if one of the inactive siblings decided to cash out, a frequent occurrence in family businesses.

He can identify three or four of the 27 members of the next generation who he thinks might want to join, although they are all too young to tell for sure. With he and his brother expecting to work at the store for many years, they have not started laying the groundwork for how to incorporate the third generation.

Kalb Construction Co. managed a smooth handoff using a different structure. Rather than waiting to pass the company to his two sons through inheritance, the late company founder George F. Kalb had his two sons take over in 1980 through a buy-sell agreement.

"We did a lot of estate planning and were able to make the transition uneventful," said current President George D. Kalb, now 62.

As part of the process, he and his brother Steven essentially worked apprenticeships in the company until his father felt they knew enough to take the helm. The father then took himself out of the chain of command, thereby avoiding what experts consider a quicksand pit for many family businesses where the older generation tries to continue making decisions and winds up butting heads with the younger generation wanting to plot its own course.

"He just wanted to phase out into the sunset," said the younger George Kalb of his father, who died in 2003.

Last year, he bought out his brother Steven, and brought in a nonfamily employee as a minority shareholder. His son Jeff also has a minority stake, setting up for a third generation of family control, although a succession plan has not been worked out. George Kalb said he will wait a few years to see how the plummeting fortunes of the local real estate market shake out before making long-term decisions.

Generational differences have come into play at Jack Dish Plumbing, started by Dish in Calgary, Alberta, 32 years ago. It was reconstituted in Las Vegas in 2001; he and his two sons split ownership evenly.

"We have tried to slowly incorporate the Internet into our advertising and name recognition," said Joey Dish, speaking of him and his younger brother David. "Dad always wanted just to put an ad in the Yellow Pages."

On the other hand, Joey credits his father with pushing decision-making on him and his brother early and often.

"He realizes he is reaching a certain age where he is slowing down," Joey Dish said. "He has pushed us to make the calls and stick to them."

For a handful of large companies, going public became a vehicle for maintaining family control while diluting family equity. In 1993, Frank Fertitta Jr. stepped aside for sons Frank III and Lorenzo when Station Casinos completed its initial public stock offering.

At Boyd Gaming Corp., three members of the founding Boyd family control 35.8 percent of the stock, mostly through trusts. In addition, Marianne Boyd Johnson, the daughter of Executive Chairman William S. Boyd, now sits as vice chairman and executive vice president, while her brother William R. Boyd, is a vice president and also a board member. The company has not laid out publicly a succession plan for when the elder Boyd, now 76, steps down, but did name a nonfamily member last year to take over his position as CEO.

This story first appeared in the Business Press. Contact reporter Tim O'Reiley at toreiley@lvbusinesspress.com or 702-387-5290.