Family businesses account for 54% of private sector Gross Domestic Product (GDP), yet 36% of family businesses don’t have a strong succession strategy in place. While those numbers may shock you, it is not surprising that many small business owners are consumed by the myriad responsibilities of running their businesses.1
Nevertheless, owners ignore succession preparations at their peril and possibly at the peril of their heirs.
There are a number of reasons for business owners to consider a business succession structure sooner rather than later. Let’s take a look at two of them.
The first reason is taxes. Upon the owner’s death, estate taxes may be due, and a proactive strategy may help to better manage them. Failure to properly prepare can also lead to a loss of control over the final disposition of the company.2
Second, the absence of a succession structure may result in a decline in the value of the business in the event of the owner’s death or an unexpected disability.
The process of business succession is comprised of three basic steps:
Keep in mind that a fundamental prerequisite to business succession is valuing your business.
As you might imagine, business succession is a complicated exercise that involves a complex set of tax rules and regulations. Before moving forward with a succession, consider working with legal and tax professionals who are familiar with the process.
1 FamilyBusiness.org, 2025
2 Typically, estate taxes are due nine months after the date of death. And estate taxes are paid in cash. In addition to estate taxes, there may be a variety of other costs, including probate, final expenses, and administration fees.
