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Business Transfer

Succession Planning, an important issue for families around the world

Passing on a business to the next generation is a difficult process and one that, more often than not, is likely to be unsuccessful, whether within or outside the immediate family.

Only one-third of all family businesses are successfully transferred to the next generation and only 13% are transferred onto the third generation.

The primary reason for this low survival rate is the failure to develop and effectively plan for the transfer of ownership and management of a closely held family business.

Each subsequent generation will probably have a different lifestyle than the business founder and entrepreneur. Children and relatives may not have the same drive and commitment; they may go to well-known schools, get a taste of the good life and then may not share the passion of the business founder for the hard work required in the chosen business sector.

What can you do to ensure smooth succession

Before transferring a business there are many aspects of the next generation's desires and abilities which need to be assessed. For instance, their capacity for decision-making, leadership skills, their personal desire to succeed, and interest in the business at hand.

Ascertaining the structuring of the entity and the control of power over the transferred business is essential to ensure that the founder keeps control of his net worth still invested in the business.

Founders often have three solutions:

transfer the business to the heirs and keep on control over it
sell the business to a third party
list the business and hire professional management to run it