Succession Planning in a Familyowned Company

Abstract

This Master's Thesis is written in Business Economics and Auditng. The primary purpose of this thesis is to provide family business owners, advisors, and auditors with insights into generational successions in Danish family-owned businesses while the business owner handing over the company is still alive. The thesis looks at the current tax laws and regulations regarding tax-free restructuring options within the family, the valuation of family-owned businesses using succession, and the available financial options. Generational succession requires careful planning and is open a lengthy process. It involves considering both hard and soft values. The business owner must assess whether the younger generation has the desire and ability to sustain operations. Alternatively, they may conclude that a more sustainable option is to sell the business to an independent buyer, an employee, or liquidate the business. The thesis also highlights restructuring options, as business structures are rarely optimal in the context of generational succession. Restructuring models serve as tools to facilitate generational succession and play a key role in the overall restructuring process. These models may result in taxation, or be implemented with tax succession, whereby the owner is not taxed on any profit from the restructuring until shares are disposed of. Furthermore, relevant valuation models are discussed. As transactions open occur between the related parties, and these shares are open not publicly traded, specific valuation models are required by law to determine the value that independent buyers would pay for the shares. Once the shares are valued, various financing models can be used to pay the transfer amount. These models can be used individually or combined, taking into account the parties' needs. Finally, the reviewed theory is applied to a practical implementation of a generational succession in a fictional case to provide the audience with an understanding of the practical aspects of the generational succession topic.