This paper deals with intergenerational successions of small and medium‐size enterprises (SMEs). Entrepreneurs face an unavoidable succession dilemma: they must make either explicit or implicit strategic decisions about transitioning ownership of the family business. The main alternatives are to sell the company to someone outside the family or to make arrangements for an interfamily succession. In the latter case, there are many transition modes, e.g., through a gift of shares or a ill. This paper uses decision trees to analyze intergenerational successions problems. One conclusion of the paper is that it is important for a society to provide a legal system that facilitates transitions of family companies within the family because the legal system will, among other positive factors connected with family businesses, preserve idiosyncratic knowledge of family character.
The succession process of small to medium enterprises (SMEs) creates lifelong dilem‐ mas for entrepreneurs. Who would like to be reminded of his or her imminent mortality by the children's claim on the family company? One way to enhance the value of an enterprise is to ensure that family ownership remains, since this will preserve idiosyncratic knowledge. However, there are several important considerations of a transaction‐cost character that hamper the transfer of ownership of the firm. Especially, considerations of tax consequences can make it very complicated to plan a transfer of the ownership of a SME during the lifetime of the owner. Sweden serves as an interesting illustration of the implications of different tax laws on the choice of succession arrangement since it recently decided to abolish the gift and inheritance tax starting January 1, 2005. This article reports on the tax‐induced contractual difficulties. These difficulties are compared with the relatively less complicated situation that occurs when a country such as Sweden abolishes taxes on inheritance and gifts. Case vignettes are used to illustrate the legal dimension of transfer of ownership. A number of recommendations are provided for how to enhance the family succession process of SMEs. A case study supports these findings.
Purpose-Our purpose is to explore the case of divorce in family business from a legal perspective. Design/methodology/approach-We rely on legal analysis and interviews with estate distribution executors to discuss problems with the legal rules and how they are practiced. Findings-Our findings show that the law is ill fitted to the situation where there is a family business included in the division of marital property. In divorce, family law dictates the division of marital property and the family business is reduced to an asset to be divided like any other. Critical issues are identified and elaborated. Research limitations/implications-Divorce and other disruptions to the family system should be considered in family business research among other threats to the business. The legal perspective on divorce in the family business offered here primarily concerns ownership issues. The impact of divorce on management is equally in need of exploration, which is our suggestion for further studies. Practical implications-Our paper illuminates in which ways the business is hampered from divorcing owners and discuss critical issues with applying family law in a family business context. Social implications-Policymakers should establish rules in which shares in an unlisted business are by default assigned to separate property until something else is contracted. Originality/value-New light is shed on the practical problems of interpreting family law in a family business context advancing our understanding of family aspects in family business research.
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