Planning ahead key to keeping business in familia

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After spending years building up her Austin business, Elizabeth Triana knows that someday, somebody else will be running it.

Her shop, Triana Tailors, is a sewing and alterations business on Burnet Road. Triana — who came to the United States from Mexico in 1984 — founded the business in 2007, after spending 20 years working in other sewing shops around Austin.

The shop has three employees, and Triana gets help running it from two of her three children: Francisco, 28, and Margarita, 17.

While Triana, 50 has no plans to leave the business any time soon, she says she has talked to a lawyer about estate planning. “In this business if I am missing, and nothing is put in writing, the business could be dissolved, its functioning could be disrupted,” she said. “That is why this is very important.”

Triana is confronting a difficult reality faced by many small business owners: How to plan for turning the business over to someone else.

It’s a duty that would help avoid problems and could even save their company, business experts say — and it impacts Hispanic business owners at a higher rate than some other communities. In the United States, 70 percent of Hispanic business owners plan to pass their business on to their families, according to a 2011 study by Massachusetts Mutual Life Insurance.

In 2013, Central Texas had more than 33,000 businesses headed by Hispanic owners, and that number could surpass 50,000 by 2020, according to a 2014 study by the Greater Austin Hispanic Chamber of Commerce.

An unforeseen situation, such as an illness or death of one of the owners, could leave the business at a great disadvantage, said Ana Estrada, a small business advisor and lawyer in Travis County.

The business could face problems such as not being able to withdraw money from the bank, not being able to pay taxes, pay suppliers, or carry out other legal commitments, if the owner is the only legally responsible party and is no longer available, explained the expert.

Business owners “are so focused in making sure the business is well-run that they become blind about this topic, and they refuse to talk about it or to ask themselves these questions,” Estrada said.

In the United States, 50 percent of all small businesses fail after four years, said Al López, executive director of the Economic Growth Business Incubator, a nonprofit organization that advises and provides training to people who want to become entrepreneurs and open their own businesses.

“If the business reaches the fourth year mark, is successful and is not in trouble, then it’s a good time to start thinking about a succession plan,” López said.

Experts say there are also other indicators that could establish the right moment to seek advice about a succession plan.

“When you have a viable business, that is already established, owns equipment, has properties or money in the bank, even if it is not much, one has to start talking already about what would happen if tomorrow there were an accident and I were in the hospital and couldn’t take care of business,” Estrada said.

She also said there are a series of options for those who seek to plan the succession of the family business.

Among the options of succession are testaments, business transfers to family members, selling the business and establishing a trust account, said Estrada, who has practiced criminal law and civil litigation.

The options are chosen based on several aspects, such as business goals and family involvement. It is also necessary to look for an accountant, a lawyer and a financial planner to integrate a team to advise over the succession of a business, Estrada said.

“Definitely those in charge of the business, if they are a couple or just one of the parents, they have to see this part of running a business as important as paying taxes, because in the end they will have to pay a lot of taxes if there is no a well-defined succession plan,” Estrada said.

Those issues are an ongoing challenge for companies like Alva Property Services Companies. Founded by Jonathan Alvarado and Maria Alvarado, the Austin-based company does landscaping and yard work, cleaning and remodeling. The company has 10 employees, most of them family and friends.

The Alvarados’ son Mynor Alvarado, 30, returned to Austin in 2013 to become general manager and run the family business. Mynor Alvarado grew up in Austin, went to college at St. Edward’s University, and graduated in 2007 with an business degree.

Mynor says he hasn’t yet talked with his parents about planning for a succession, but knows he has to plan long-term.

“I am building a legacy, building something that can last even after we are gone,” Mynor said. “You cannot focus just on the present. If you only focus on the present you are always going to be making bad decisions.”