Start Succession Planning Now
Diane Glover
May 14, 2014

The majority of North American businesses are family owned and many are facing ownership-transfer issues as the baby-boomer founders enter retirement.
Roadblocks to Successful Transitions
There are four major reasons successions in family businesses tend to fail:
1. Lack of viability. The business is so dependent on the founder that it cannot operate without his or her continued, active participation.
2. Lack of planning. The successors aren’t prepared, trained or experienced enough to take over management.
3. Lack of will. The owner simply doesn’t want to give up control.
4. Lack of interest. Family members have little or no interest in taking over the business.
On the eve of a retirement, or following a death, family-run businesses have four basic choices. The first two involve giving up a family tradition: closing up shop or selling the business to outsiders or non-family employees.
The second two choices involve keeping the business under family control and either hiring outside managers or passing on the business to younger family members.
That final option of family succession can be difficult and not every business that attempts it is successful. Family dynamics often play a major role in the success or failure of a transition. Only a very small number of family businesses succeed in transfers to the second generation and even fewer make it to the third generation.
The key to success: Clear communication and the cooperation and commitment of everyone involved. Set up a family retreat early on in the process and bring in an independent third-party facilitator, such as your accountant, who can keep everyone’s eye on the ball and smooth over the rough patches.
The facilitator can objectively help to determine strategy, assess the current situation, develop strategic plans and discuss, review, implement and monitor those plans. Other professionals, such as insurance agents and bankers, may also be called in to help devise the plans and put them into effect.
The planning involves mapping out four distinct strategies in this order:
1. A business plan that sets out the founders’ original vision, mission and goals and gives other family members a clear picture of what the future should entail.
2. A family plan aimed at avoiding sibling rivalries and management-control issues. Here, you address compensation policies, management expectations, performance measures, job descriptions and codes of conduct within the business. You should also outline who is entitled to join the business and how to treat family members who aren’t involved with the company.
3. An estate/retirement plan that incorporates a business valuation, how to finance the buyout, distribute retirement funds, and calculate estate taxes. Another critical issue here is the inheritance of corporate and non-corporate assets.
4. A succession plan that sets the date for retirement, establishes a timetable for training new management, outlines any role the founders will continue to play and arranges for the management of cash flow.
It’s never too soon to start: Success planning helps you balance both personal and business interests and helps ensure that your family-run business gets through the transition successfully.

About The Author
As the Manager of Practice Growth, Diane focuses on the market awareness and growth of Kirsch CPA Group…
Tags
Sign Up for Email Updates
Related Articles



Tax Treatment of Debt Forgiveness: Watch Out for Tax Bills Delivered COD
- 01-18-23
- Kirsch CPA Group












Manufacturers: Be Aware of These 3 Business Tax Provisions Currently in Limbo
- 01-18-23
- Kirsch CPA Group



The Tax Deductible Mileage Rate for Business Driving Increases for 2023
- 01-04-23
- Kirsch CPA Group









Succession Planning Considerations for Construction Business Owners
- 12-14-22
- Kirsch CPA Group






Prevent Fraud at Your Construction Company With a Holistic Approach
- 11-30-22
- Kirsch CPA Group









Manufacturers Must Act Now to Maximize Depreciation-Related Tax Breaks for 2022
- 11-09-22
- Kirsch CPA Group



It’s Time for Businesses to Rethink Their Working Capital Practices
- 11-09-22
- Kirsch CPA Group









Social Security Wage Base and Earnings Test Amounts Increase in 2023
- 10-27-22
- Kirsch CPA Group



New Law Enhances Payroll Tax Break for Small Manufacturers’ Research Expenses
- 10-13-22
- Kirsch CPA Group







































How Buy-Sell Agreements Factor into Business Owners’ Estate Plans
- 09-14-22
- Kirsch CPA Group









SALT Cap Workaround Law Could Save Ohio Business Owners Over $100 Million
- 08-31-22
- Kirsch CPA Group
























How Manufacturing Companies Can Benefit from the Section 179 Expensing Deduction
- 08-04-22
- Kirsch CPA Group



























Could the Work Opportunity Tax Credit Help Your Construction Company?
- 06-23-22
- Kirsch CPA Group






Good News: IRS Boosts Standard Mileage Rates for Second Half of 2022
- 06-23-22
- Kirsch CPA Group
























Education Benefits Can Help You Recruit and Retain Smart Employees
- 05-26-22
- Kirsch CPA Group









Ensure Your Construction Accounting System Has the Right Features
- 05-12-22
- Kirsch CPA Group





















John Kirsch Named to Greater Butler and Warren Counties Business Hall of Fame
- 03-25-22
- Diane Glover






Manufacturers Need to Act Soon to Take Advantage of 100% First-year Bonus Depreciation
- 03-17-22
- Kirsch CPA Group



























Commission Fraud: Salespeople Getting Paid More Than They’ve Earned
- 02-04-22
- Kirsch CPA Group
















































Consider a New Approach to Meeting Your Business Real Estate Need
- 09-17-21
- Kirsch CPA Group
























Beware: Teleworking Arrangements May Cause State Tax Withholding Issues
- 08-18-21
- Kirsch CPA Group
























5 Common Construction Accounting Risks — and How to Address Them
- 07-07-21
- Kirsch CPA Group















Supreme Court Finds No Standing to Challenge a Provision of the ACA
- 06-24-21
- Kirsch CPA Group






Labor Shortage: Unlock Solutions by Evaluating Your Employment Value Proposition
- 06-09-21
- Kirsch CPA Group









Material Participation Standard is the Key to Unlocking LLC Tax Losses
- 05-27-21
- Kirsch CPA Group









Know Your Legal Obligations Under the Americans with Disabilities Act
- 05-13-21
- Kirsch CPA Group



























PPP Loan Not Forgiven? There’s a Safe Harbor for Deducting Expenses
- 12-03-20
- Kirsch CPA Group












What You Need to Know About the Deferral of Payroll Tax Obligations
- 09-15-20
- Kirsch CPA Group


















PPP Loan Forgiveness – Significant Borrower Friendly Changes on the Horizon
- 06-04-20
- John Kirsch





















Tax Filing Deadline Remains April 15 – Payment Due Extended to July 15
- 03-19-20
- John Kirsch








































































Prepare to Receive a Social Security Administration No-Match Letter
- 10-15-19
- Kirsch CPA Group





















IRS Announces Changes for Personal Use of Employer-Provided Vehicles
- 06-10-19
- Diane Glover






























Watch Out for these Tax Issues When Planning for Your Business in 2018
- 06-26-18
- Diane Glover









What Image Does Your Organization Present to Large Contributors?
- 03-15-18
- Kirsch CPA Group



8 strategies to help you adapt to economic down turn without layoffs
- 02-24-18
- Diane Glover













































Remember To Take Required Minimum Distributions at Age 70 1/2 Or Face Penalties
- 02-17-17
- Sue Schloemer







































Time is Money: Don’t Spend Valuable Time Inputting Data into QuickBooks
- 06-18-22
- Diane Glover




