ASSESSING THE IMPACT OF SUCCESSION PLANNING ON THE LIFESPAN OF FAMILY-OWNED BUSINESSES IN INDIA

Abstract

Family-Owned Businesses (FOBs) form the backbone of India’s entrepreneurial and economic landscape. They account for the majority of privately held firms in India and contribute substantially to employment, regional development, and capital formation. However, these enterprises face a serious threat to long-term continuity, especially when transitioning from one generation to the next. The lack of structured succession planning, coupled with regulatory and tax ambiguities, results in fragmentation, loss of capital, and even business collapse.

This research critically evaluates how succession planning—or the absence thereof—affects the longevity of FOB in India. It draws on comparative legal frameworks adopted in Spain and Italy, where succession laws have been tailored to support generational continuity, both through legal recognition and fiscal incentives. These countries, by offering inheritance tax reliefs, recognizing intra-family transfers, and providing legal clarity, have demonstrated how policy interventions can stabilize family enterprises across generations.

Through doctrinal and policy-based research, the paper identifies the gaps in India’s current tax and corporate frameworks that hinder effective succession. It proposes a policy model that draws from successful European practices but adapts them to India’s unique social and legal context. The research aims to demonstrate that the longevity of FOBs is not just a private or familial issue but one with significant macroeconomic implications, warranting urgent legislative attention.