by Barnaby Meins

Created on: January 03, 2009   Last Updated: April 04, 2012

A major concern that an owner of a family business faces is how to transfer the business to the next generation in a proper and cost-effective way. This transfer is known as business succession and pertinent issues in business succession planning which should be considered can be categorized into ownership, management and taxes issues.

Ownership and management are distinct issues. The former does not involve active effort to run the business while the latter does. Although it seem fair to distribute the ownership of the business equally among the children, it could be better if the successor has a larger share of the pie in order to keep him/her motivated in the long run. Aspects of estate planning will need to be taken into account for a fair treatment.

As for management, the current owner has to examine the various potential successors in the family or the business in an objective manner. When considering who should take charge of the business, the ability of the person to run the business and the level of interest to take over the business are of paramount importance. Any plans will have realistic and then carried out accordingly. In a large corporation, the board should be made aware of transition in management before grooming of the successor begins to prevent rejection in the future.

Upon selecting the successor, the owner should start getting him/her ready to run the business. For a start, having the successor work along with the owner will allow training to be done effectively. The successor should be allowed to take on some responsibilities. A crucial aspects that the owner should not overlook are getting the successors to earn the faith of clients and employees of the business. For example, the successor should be introduced to the clients and employees.

In actual fact, letting the clients and employees know that they are valued by the successor in the same or even better way will ensure success in the business succession planning. Also, teaching of business skills and sharing in decision-making can be beneficial for the succession planning. Depending on how fast the successor learns and how large the business is, some time has be factored in before actually handing the business over to the successor to run.

In certain cases, an owner's ability to run the business may be different from that of the successor. This should not become a problem as long as the owner knows how to make the best use of the talents of the successor. A succession plan should

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