Business succession: planning and legal matters
ResourcesguideInheritance LawBusiness succession: planning and legal matters
Inheritance Law
6 min. Lesedauer
31. July 2025
Just a few years ago, family succession was a matter of course. However, a change is now emerging: more and more Swiss companies are being taken over by outsiders. This is mainly because the next generation often focuses on their own career aspirations. In this article, you will learn about the different forms of business succession and the legal aspects to consider.
What is business succession?
Business succession determines who will take over a business after the owner retires. The business can be handed over to a family member (internal succession) or to an outside person (external succession). Ideally, this should be planned ten years in advance. This way, the company’s management knows what will happen to the company in the future if the owner retires, suddenly falls ill or dies. If the process is initiated early, there will be enough time to train the successors and plan the handover.
Why is it important to plan for business succession?
Two aspects are generally important for entrepreneurs: securing their family’s future and ensuring the continued success of their business. In order to retire with peace of mind, it is therefore important to plan the future of the business. Ideally, a capable person who is already passionate about the business should be appointed to the management team.
By planning their company’s succession, entrepreneurs can clearly define how they envisage the company’s future. This can prevent family disputes and ultimately even have a positive impact on the company’s economic success. In most cases, entrepreneurs know what is good for the company and make decisions accordingly.
When should you start planning your business succession?
As an entrepreneur, you should start thinking about your succession five to ten years before you plan to step down. This gives you enough time to calmly consider all your options. If you’re looking for an external successor, you can take your time to find the right person. If an employee is taking over, they can be trained and prepared for their new role with enough lead time.
Even in the case of a family succession, a certain amount of training time is often necessary. This is especially the case if the successor has not previously worked in the company but would like to take over the future management.
- Intra-family business succession: Operational and financial management is transferred to a family member.
- Intra-family management succession: Only operational management is transferred to a family member.
- External management with family control: In this case, only financial control remains within the family, while operational management is taken over by an external party.
- Management buy-out: The company is sold to an employee who has the necessary skills and financial resources.
- Management buy-in: An external person buys the company and takes over management and financial control.
- Sale to another company: A parent company buys the company and takes over management. Larger companies often buy smaller companies.
- Private equity: The company is sold to investors, who often see it as an investment opportunity and sell it again after a certain period of time.
- Initial public offering (IPO): An IPO is only suitable for large companies with a turnover of at least CHF 100 million. This option is only suitable for selling a company to a limited extent and involves a great deal of effort and expense.
Which is better – internal family succession or external company succession?
To determine which option is more suitable for your company, it is important to carefully consider your individual situation. In many cases, the topic of business succession is emotionally charged: for example, an entrepreneur may want her son to continue her life’s work and the family tradition. In addition, there is usually a relationship of trust with relatives, which can facilitate the handover of the company. Last but not least, the financial security of the family also plays a role, which can be resolved through internal family succession.
In other cases, it may make more sense to transfer or sell the company to an external person. It is becoming increasingly common for the next generation to have reoriented themselves professionally and to be working in a completely different industry. If the descendants do not want to be involved in either the operational or financial management of the company, an external succession should be considered. This may also be in the interests of the company, as in this case a person should be sought who has the necessary technical and management skills to run the company successfully.
Business succession and inheritance law
Family-internal business succession is always inevitably linked to inheritance law. In the case of married entrepreneurs, matrimonial property law also comes into play. If there are several heirs with compulsory portion claims, inheritance disputes may arise in the course of business succession. The positions should therefore be clarified from the outset, preferably in an inheritance contract. In particular, the compulsory portion claims of the other heirs must be taken into account. In addition, a compensation obligation for the new management may arise in the event of inheritance.
Transfer of a business by way of gift
When a business is taken over within the family, this usually happens through a gift or inheritance. Inheritance and gift tax laws (ESchG) are regulated at cantonal level and can therefore vary depending on the location of the business. In many cantons, the direct descendants of the deceased are exempt from inheritance tax. Other cantons offer certain benefits in the event of a business takeover.
Company succession often takes place during the testator’s lifetime, e.g. when they wish to retire. In order to reduce the risk of inheritance disputes, clear conditions should be established and information disclosed transparently. This applies in particular to the value of the company at the time of the takeover. In this way, the new management protects itself against possible claims by the heirs in the future. When the inheritance occurs, it is clear at what value the company was transferred. Profits generated since then do not fall into the estate but remain in the possession of the new owner.
Where is business succession regulated?
In principle, you can regulate company succession in a will or inheritance contract in accordance with Article 512 ff. of the Swiss Civil Code (ZGB). An inheritance contract is generally the better and safer solution – especially for the heirs. This is primarily because an inheritance contract must always be signed by both parties. A will, on the other hand, can be amended without the consent or knowledge of the heirs (Article 509 ZGB).
Tip: In general, clear rules on business succession can effectively prevent inheritance disputes. As an entrepreneur, you should therefore take care of your business succession at an early stage. This will protect you in the event of sudden death, for example, and save your heirs and other relatives a lot of trouble. Seek advice from an inheritance law expert so that you are aware of all the options available to you and can draw up a legally valid inheritance contract.
What else to consider
The exact structure of the company succession also depends on the legal form of the company. While a self-employed entrepreneur decides on this alone, the owner of a company with several owners must consult with them.
For young entrepreneurs, external business succession can be an opportunity. They take over a functioning company and can build on its success. Employees who want to advance within the company and have the financial means for a management buy-out benefit particularly from this option.
Facilitating business succession following the first revision of inheritance law
By reducing the compulsory portions for descendants, entrepreneurs gain significantly more flexibility and scope to shape the future of their business succession according to their own ideas and needs.
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FAQ: Business succession
Business succession refers to the process of handing over a business to new management (e.g. due to retirement or sudden death). Owners themselves decide into whose hands they want to place their business.
A rough distinction can be made between transfers to related parties and external parties. Hybrid forms are also possible, e.g. when the financial management of the company remains within the family, while operational management is transferred to an external party or a member of the company. The most common options are family buy-outs, management buy-ins and management buy-outs.
Many entrepreneurs see a company as their life’s work. It may therefore feel more appropriate to pass it on to descendants or close relatives. The future financial security of the family also plays an important role here.
Depending on the individual situation, a person from within the family or an external new manager may be more suitable. This depends primarily on the characteristics of the company and the preferences of the current owner.
Ideally, entrepreneurs and owners should begin planning their succession around ten years before the planned transfer. This includes the entire process, from decision-making to the form of business succession. This allows sufficient time for any changes, for training the new management or for finding a buyer.
If there are several descendants or potential heirs, entrepreneurs should ensure fairness and equal treatment in their will or inheritance contract. For example, it is essential to take into account the compulsory portions of all heirs. Inheritance and gift tax regulations vary from canton to canton.
The most important thing is that the chosen family member really wants to take over the management of the company. Business succession is often associated with expectations that the next generation wants to fulfil, but ultimately does not feel happy with.