Family businesses are the heart of many economies, but their continuity can be threatened if a well-structured succession plan is not in place. Generational transition involves not only handing over control but also ensuring that the values, vision, and sustainability of the business remain intact.

Below, we explore the key aspects of a successful succession plan that ensures the future of family businesses.

 

What is a succession plan and why is it essential?

A succession plan is a strategy that defines how and when the management and ownership of a family business will be transferred to future generations or new leaders.
Without a clear plan, the transition can lead to conflicts, uncertainty, and loss of business value. Therefore, anticipating this process is crucial to maintain the business’s stability and continuity.

 

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Key elements of a successful succession plan

Identifying the successor(s)

Choosing who will lead the company is one of the most delicate decisions. This process should be based on objective criteria, such as skills, experience, and commitment, and not just the family relationship.

  • Important criteria: leadership skills, business knowledge, and strategic vision.
  • External succession: If no suitable internal candidate is found, an external professional can be considered to ensure efficient management.

Defining roles and training the successor

It is crucial to clearly establish the roles of each family member involved in the business. This prevents misunderstandings and conflicts, especially in businesses with multiple owners or shareholders. Taking the time to train the future successor is also key to ensuring a smooth transition.

  • Design a well-defined organizational chart.
  • Create a family protocol to regulate the relationship between the family and the business.
  • Integrate the successor into the company’s strategic operations.
  • Provide training in business management, leadership, and conflict resolution.

Proper tax planning

Proper tax planning is crucial to avoid unforeseen burdens, minimize tax liability, and ensure the business’s long-term viability. Lack of knowledge about tax obligations can result in fines, surcharges, or disputes with the tax authorities.

 

Taxation in the succession of a family business

Understanding the taxation of family business successions is also essential for effective planning. So, what taxes are typically involved and support family continuity?

Inheritance and Donations Tax

Inheritance and Donations Tax allows for a 95% reduction in the amount to be paid in case of transferring shares or stakes in a family business. To apply for this tax benefit, the law requires the fulfillment of certain conditions:

  • The company cannot be dedicated to managing movable or real estate assets: it must perform some industrial activity or provide a service.
  • The family participation must be at least 5% if the successor is a single member and 20% if it is a family group.
  • The successor or a family member must hold a management position in the company.
  • At least half of the income the successor receives must come from their work in the company, not from other jobs or external investments.

In addition to benefits in taxes such as Inheritance and Donations Tax, the Personal Income Tax (IRPF), and the Wealth Tax favor the transfer of businesses between family members.

 

Common challenges in the succession process

  1. Resistance to change: In many cases, the outgoing generation may have difficulty delegating control. Change can appear, in the eyes of the founder, as a threat to the status quo achieved over a lifetime of business. In other words, the greater the investment of resources in the business, the greater the resistance to change.
  2. Family conflicts: Emotions and family ties can complicate business decisions. Factors such as the lack of information to handle certain similar situations, differing visions of heirs about the company’s future, or generational differences are elements that can generate tensions and conflicts during the succession process.
  3. Lack of long-term planning: Delaying this process can jeopardize the stability of the business. Identifying negative factors affecting the organizational climate and conducting a thorough diagnosis is essential to develop effective strategies.

Addressing these challenges early with the help of experts can make the difference between a successful transition and a business crisis.

 

✅​ The role of specialized consulting

Designing a succession plan involves legal, tax, and emotional aspects. A specialized consulting firm helps address each stage of the process with professionalism, ensuring that the goals of both the company and the family are met.
At Adlanter, we offer a comprehensive approach to ensure the continuity of family businesses. We help define personalized strategies that range from tax planning to family mediation, providing the peace of mind that the business will be in good hands. Contact us for more information!

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