Family Business Succession Flashcards
7 cards from real CSP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Family Business Succession flashcards as text
What is the 'successor readiness gap' in family business succession planning?
Answer: The difference between the skills a successor currently has and those required to lead
The successor readiness gap refers to the developmental deficit between a candidate's current competencies and what is required for effective leadership of the business.
Which scenario most commonly triggers a forced, unplanned family business succession?
Answer: Death or sudden disability of the owner
The sudden death or incapacitation of the owner is the most common trigger for unplanned succession, underscoring the importance of contingency planning.
In family business governance, what is the primary distinction between an 'advisory board' and a 'fiduciary board of directors'?
Answer: Advisory boards provide guidance without legal authority; fiduciary boards have legal duties
An advisory board offers non-binding guidance while a fiduciary board carries legal duties of care and loyalty, with binding decision-making authority.
A founder refuses to relinquish day-to-day control despite naming a successor. This behavior is best described as:
Answer: Founder's syndrome or 'letting go' problem
Founder's syndrome occurs when a founder cannot delegate authority or relinquish control, often undermining the successor's ability to lead effectively.
When structuring an installment sale of a family business to a successor, which tax benefit is most significant?
Answer: Gain is recognized ratably over the repayment period, spreading the tax liability
Installment sales allow the seller to spread capital gain recognition over multiple years, potentially reducing the overall tax burden by using lower marginal rates.
Which factor is LEAST relevant when selecting a family business successor from among multiple candidates?
Answer: Birth order within the family
Birth order is a personal family characteristic with no bearing on leadership ability and should not be a criterion in a merit-based successor selection process.
Which estate planning technique allows a business owner to freeze the current value of the business in their estate while transferring future appreciation to heirs?
Answer: Estate freeze recapitalization
An estate freeze recapitalization restructures ownership so the founder retains preferred interests at current value while heirs receive common interests capturing future growth.