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Family business succession checklist.

A common consulting engagement for CPAs is helping a closely held business client plan for management succession. The issues to be considered and the approach to take involve working closely with the client to disclose data on the company and its industry, employee stock ownership plans and the possibilities of outside sale, merger or liquidation. The first step, though, is to prepare a checklist of family and key employee information:

Family information

1. Who are the family members currently involved in operating the business?

2. What are their job descriptions?

3. How are they compensated?

4. Which family members are not involved in operating the business? What businesses are they in?

5. What business and educational experiences do they have?

6. Do any family members not involved in operating the business have an ownership interest in the business?

7. What are the relationships of the people staying in the business?

8. Are any family members in the business qualified to be president or managers? What is the basis for the determination?

9. Can the family member who is selling the business retire when and in the manner desired if family succession is chosen rather than outside sale?

10. Have any promises to or agreements with family members and key employees been made?

11. Will key employees stay if the business passes to a family member?

12. What current or potential conflicts exist between family members?

13. Is the family willing to discuss the available options openly?

14. What are the withdrawing members' plans for involvement with the business after the transfer of ownership?

15. Are all family members willing to sell their interests?

Key employee information

1. Who are the key employees within the organization?

2. Which key employees will stay if the business is sold to outsiders?

3. In the owner's opinion, which key employees have the expertise to run the business?

4. Are any key employees interested in owning the business?

5. What are the advantages of selling to key employees over selling to or merging with an outside party?

6. What are the disadvantages of selling to a specific employee or group of employees? (Consider each employee or group separately. )

7. Do the employees have the resources to buy the business or arrange a deal to buy? (Consider each employee or group separately.)

8. What current or potential conflicts exist between key employees?

Adapted from Consulting Services Practice Aid no. 92-3, Assisting Closely Held Businesses to Plan for Succession, American Institute of CPAs, 1992.
COPYRIGHT 1992 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Journal of Accountancy
Date:Oct 1, 1992
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