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Options for Business Succession in Japan

two woman chatting 1311518 - Options for Business Succession in Japan

Traditionally, Japanese business owners prefer to pass their company to one of their family members.  While that seems to happen in most cases, it’s not always true. In fact, it’s becoming more common for a business to be passed to directors, employees, or even selling to un-related third parties.

Leaving a business to an heir can be complicated due to exposure to inheritance taxes. And, if the heir has worked in the business, they might have difficulty in learning and managing it.

An advantage of leaving a company to current directors or employees is that they know the business and most likely have strong relationships with important suppliers and customers.

If you would like to leave your business to your heir, you will have to worry about the inheritance tax. You would like to know how to lower the tax.

The problem with selling or passing the business to directors and employees is they may not have access to enough cash to purchase controlling shares in the company.  

Also, if the current owner has acted as the guarantor on any company loans, the director or employee successors would need to replace the previous owner as guarantor. If they can’t convince the bank(s) to accept them as a guarantor, the previous won’t be able to pass or sell the business to them.

M&A is becoming a more common method of business succession. The owner is able to receive cash in exchange for the their company, and if the acquiring company is from the same or related industry it will be easier for them to manage the newly acquired business.