And even though more than half of the business leaders who plan to retire believe their companies will stay in the family, it has been estimated that only 36% of family firms actually are passed on to a second generation.
The transition from one generation to the next is considered to be one of the biggest risks to the survival of a family-owned business, so it's somewhat surprising that 47% of family firms have no formal succession plan.
A thoughtful succession strategy not only outlines when and how ownership should be transferred but also takes tax implications, family relationships, and other sensitive issues into account.
Think realistically about who is most capable, motivated, and/or prepared to run the business. Because it may take several years to groom a successor, it's important to identify potential candidates early. If no family members are interested in leading, you may want to consider tapping someone competent from outside the family.
Family members who are not willing to take on significant operating roles may still want to retain a stake in the company. How you decide to divide your ownership shares among your heirs and business partners could have a major influence in the future of the company. Involving family members in the process may help promote a smooth transition.
Keep Taxes in Mind
Because tax laws tend to change frequently, it can be critical to stay on top of potential estate tax issues. trust, buy-sell agreements, and/or insurance policies may be used to help reduce taxes or provide funds to help pay them.
It's a shame that some businesses must be sold either to pay estate taxes or because family members can't agree on how to move forward.
It is important to look into all your options, find out what tax laws are in place here in St Maarten as forming a plan well before you intend to retire could help ease the transition of your business to the next generation
Sources: Price Waterhouse Coopers, 2010, John Hancock Financial Network