by Paul Oranika

Created on: January 01, 2009   Last Updated: May 13, 2012

One of the major issues facing owners of family or closely held businesses is how to implement an orderly and affordable transition of the ownership of their business to their children or family members. Business succession plans are of significant importance, despite its complexity, it is one-issue, businesses both big and small, including family owned businesses must take very seriously. Experts have illustrated the need and importance of business succession planning, for instance, in her publication, "Succession Planning as a Transformational Experience", Barbara Ross-Denroche, explained " that retention and succession planning is a combined process that should be recognized as a strategic imperative for future success". This article will discuss the need and the importance of business succession planning for the family-owned business.

Whether you are running a big corporation or a small family business, it is of utmost importance that your company establishes a very clear business succession plan for handing over the baton from the current leader to the next.Some experts believe that good and effective business succession planning often covers a period of three to six years, and may at times take longer depending on how old the successor may be at the time. Making a timely decision often helps to foster the stability of the company, by reassuring current employees and business customers and suppliers, that every thing is under control. Making an early choice also helps the siblings in adjusting to their parent's decision, their parents often benefit from the peace of mind of knowing that their business would survive and their children would be taken care of when they move on. With one less issue to worry about, the parents may now have more time to devote to retirement planning.

How does one conduct a business succession plan

Buyout plans are often a chosen strategy for the transfer of ownership from the parent to their offspring. The purpose of buy-sell agreements is to help protect, preserve, and pass on the leadership and control, as well as the value of a family-owned or closely held business at the retirement, death or disability of an owner. Buy-outs are very important strategy for every closely held business or in some cases, business with more than one owner. This strategy is usually achieved through what is more often referred to as Buy-Sell Agreements. Some of the benefit of this strategy also is that it has the least tax implications when compared

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