Most business owners in Japan want their business to continue after their retirement. A successful succession can benefit the company founder, the current stakeholders, employees, business partners, vendors, and customers. But finding the right successor and structure can be very challenging.
A common concern relates to the possibility of creating conflict in the family if one family member takes over as successor or before or after the owner passes away. There are also tax concerns related to how much tax the owner and the successor might have to pay.
Other concerns relate to how to structure a will. This is especially true when the owner wishes to pass the business to an employee who understands the business, but since they are not legal heirs it could prove to be difficult.
Some owners would prefer to sell their business but aren’t sure how to find potential buyers. Of course, all parties are looking for the best structure to reduce taxes related to the transfer of ownership.
The legal structure and process to transfer ownership to the successor has to be carefully considered so that it will pass meaningful control over the company while minimizing tax exposure and possible family or stakeholder conflict. If the structure is poorly set, the successor may not have enough power to manage the company and could end up having to pay more taxes.
A well designed succession requires legal, tax, and business planning expertise. Any business owner contemplating succession would definitely benefit from consulting with the appropriate subject matter experts.
In future blog posts, I would will provide information and ideas on how to avoid some of the most common obstacles for successful business succession planning in Japan.