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Most owners dream of keeping their businesses in the family. But achieving this goal involves making difficult, and potentially drama-filled decisions about ownership, maximizing your company's value and tax strategies. Here a few key points to consider when crafting a succession plan:

1. Control: The business owner must determine the right time frame for transitioning control of the family business to the next generation. This is a difficult and emotional time because the owner probably spent her lifetime building the business and sees it as the representation of her life's work.

A business succession plan may include an initial transfer of minority interest or non-vesting interest to the next generation as a first step, allowing the owner to maintain control while beginning the process of transferring economic value over time. After an initial transfer of non-controlling interests, the owner may begin transferring controlling interests. But here's the catch: the owner needs to be ready to cede control as opposed to transferring control only for tax purposes. Family tensions will arise if the senior generation is not in fact ready to transfer control to the next generation. And while this may be a good plot device for a television drama, it can cause real damage to a family.

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2. Future leadership: Choosing a successor is a critical part of the succession plan. In some cases, the choice may be easy. But when several family members are involved in the business, the decision of who should take the reins can become more charged. Historically the male heir would naturally take over, but in modern day, the daughter may be a better choice. Whatever the case may be, the business owner must make a decision. Don't leave it to Mom or Dad and think it will work out by itself.

3. Issues involving non-active family members: One son was shocked when his father sold the family business without consulting him first, and went on to split the money from the sale equally with his other siblings even though they had not contributed to the growth in the marketplace. Don't think succession planning is just for the owner. The owner should consider whether or not to benefit all family members equally when transferring business interests and in what way to pay or involve family members who have not been active participants. There are various tax and legal implications that can be cleared if addressed early enough. Insurance can play a key role too.

4. Continuing compensation for retiring generation: Although the successor may not realize it, this is the often the key sticking point for the older generation. Continued compensation is often a linchpin in any succession plan, but once understood and addressed by the incoming generation, it can help move the process along. The succession plan needs to address the owner's cash flow needs going forward. Some receipts can be characterized as salary and other receipts characterized as "distributions as they will be treated differently for income tax purposes. Discuss with your tax adviser before going ahead and starting a succession.

The key to successful planning is putting aside the time to sit down and discuss the future vision and do force yourself to pay for an expert to run the process so as to keep it on track. Let the drama stay on the television soap operas and keep your family happy with fond memories of the family business.

Jacoline Loewen is director of business development of UBS Bank (Canada). She is also author of Money Magnet: How to Attract Investors to Your Business. You can follow her on Twitter @jacolineloewen.

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