Your options
Passing your business to the next generation, with or without family
Passing a business to the next generation means handing over both the ownership and the running of it, usually to a son or daughter, over several years. If your children don't want the business, the next generation can still be someone else: a trusted employee or an outside successor who carries it on. This guide covers both paths.
In short: decide who will lead, prepare them for years before you step back, and transfer ownership in stages through a gift, a sale, or both, planned with an estate attorney and a CPA. If no family member wants it, an employee or an outside successor can keep the business going instead of it closing.
Start with an honest conversation
Before any plan, talk to your children, each of them, about what they actually want. Not what they think you want to hear. Many owners put this conversation off for years because they're afraid of the answer. But a son who's quietly dreading taking over, or a daughter who'd love to and assumes you'd never ask, will change your plan completely.
Some questions that help:
- Do you see yourself running this business in ten years? Running it, not just owning it?
- What would you change about it?
- What worries you about taking over?
- If you didn't take over, how would you feel about someone else doing it?
Whatever you hear, try to take it as information rather than a verdict on you or the business.
How a family business is passed down
There are three broad ways to transfer ownership. Many families use a combination.
As a gift
You give some or all of the business to your child during your lifetime or through your estate. It costs them nothing, but you don't get paid, so it only works if you can retire comfortably without the proceeds. Large gifts can have gift and estate tax consequences. Ask your estate attorney and CPA how this applies to you.
As a sale
Your child buys the business, often with a down payment and the rest paid to you over time. This gives you retirement income and treats the business as the valuable asset it is, which can also make things feel fairer to your other children. See seller financing andselling to a family member.
As a gradual transfer
Ownership moves in stages over several years, often matched to how much responsibility your successor has taken on. This is common in family businesses because it lets you stay involved, test how things go, and spread out the tax and financial impact. A phased buyout is one version of this.
Estate and tax planning matters a great deal here, and the rules are complicated. Work with an estate attorney and a CPA before you transfer anything, and make sure your will or trust matches your business documents.
Preparing a family successor
Being your child doesn't make someone ready to lead. The families who do this well treat the successor like any other future leader: they earn the role, and the team sees them earn it.
- Encourage them to work somewhere else first, if they haven't. Outside experience builds confidence and credibility.
- Have them work in different parts of the business, not just alongside you.
- Give them real responsibility early: a department, a location, or a set of customers.
- Let them make decisions, including some you'd make differently.
- Introduce them to your key customers, suppliers, banker, accountant, and attorney well before you leave.
- Agree on a timeline for handing over control, and stick to it.
For a staged plan, see how to choose and prepare a successor.
Being fair to all your children
This is often the hardest part. If one child runs the business and another doesn't, giving them equal shares can leave the one doing the work answering to a sibling who isn't. But giving the business to one child can feel unfair to the others.
Families handle it in different ways:
- The child who runs it gets the business, and the others get other assets of similar value.
- The successor buys the business on fair terms, and the proceeds go into your estate for everyone.
- Siblings who aren't involved hold non-voting shares, so they share in the value without running the business.
- Life insurance is used to provide for children who don't inherit the business.
Whatever you choose, explain it to your children while you can. Surprises in a will tend to cause the most hurt. An estate attorney, and sometimes a family business advisor, can help you structure it and talk it through.
When your children don't want the business
For many owners, this is the real question. Your children have careers, families, and lives in other cities. They love you, and they may love the business, but they don't want to run it. That can be painful to hear, especially after decades of building something you'd hoped to pass on.
It doesn't mean the business has to close. Too many profitable businesses are discontinued simply because no successor was found in time. The people, customers, and community that depend on your business don't need it to stay in the family. They need it to stay open and well run. The next generation can be someone else.
Options that keep the business going
| Option | How it works | Worth knowing |
|---|---|---|
| A manager or key employee | Someone who already knows the business buys it, usually over time. | Continuity is strong. They often can't pay much up front, so you may need to finance part of it. |
| A group of employees | Several employees buy in together, or you set up an employee ownership plan. | Can be a lovely legacy. Formal plans have setup costs and need specialist advice. |
| An outside successor | Someone who wants to run an established business joins, learns it, and buys it gradually. | Keeps the team and name. Finding the right person takes time, so start early. |
| A sale to another company or investor | A competitor, larger firm, or investor buys the business. | Can pay more up front. The business may be merged, renamed, or changed. |
You can compare these in more detail in exit strategies for small business owners andselling to an employee, family member, or successor.
Your family can still be part of it
Handing over to someone outside the family doesn't have to mean cutting the family out. Some owners keep the building and lease it to the business. Some keep a minority stake for a while. And the payments from a gradual sale can become part of what you leave your children. Talk to your attorney and CPA about what fits.
Where to start this year
- Have the honest conversation with each of your children.
- Get a rough idea of what your business is worth.
- Meet an estate attorney and a CPA about how ownership could be transferred.
- Write down your goals and timeline using our succession plan template.
- If there's no family successor, start looking at other options now, while you have time to choose well.
If the next generation isn't family
We introduce owners to vetted successors who want to carry a business on, keep its people, and buy it gradually over several years. It's confidential, it costs owners nothing, we never contact your employees or customers, and you choose who takes over. See how it works or talk it through with us.
Common questions
How do I pass my family business to my children?
Usually through a gift, a sale, or a mix of the two, spread over several years. Many families combine a gradual transfer of ownership with a gradual handover of the work, so your child takes on responsibility before they take on control.
The right structure depends on your estate, your retirement needs, and taxes, so plan it with an estate attorney and a CPA.
What happens to a family business when there is no successor?
Without a plan, many such businesses are sold in a hurry or simply closed when the owner can no longer run them, even when they're profitable. That outcome isn't inevitable. Employees, a manager, or an outside successor can often take over, especially if the owner starts planning a few years ahead.
Should I give the business to the child who works in it?
Not necessarily all of it, and not without talking to your other children. Fair doesn't always mean equal. Some owners pass the business to the child who runs it and balance things with other assets, life insurance, or a sale on fair terms. Your estate attorney can help you find an arrangement that fits your family.
What if my kids don't want to take over the business?
You're far from alone. Children often build careers and lives elsewhere, and that's not a failure on anyone's part. Your options include selling to a manager or employees, handing over to an outside successor who buys the business gradually, or a conventional sale. Each can keep the business, its people, and its name going.
How long does it take to pass a business to the next generation?
Most owners who do it well take several years: time for the successor to learn the business, for employees and customers to get used to them, and for ownership to change hands in stages. Starting three to five years before you want to step back gives you the most room.