As much as business owners do not want to think about it, there will come a time that they need to hand over their business to the next generation even if they are still in their operating prime because anything can happen before they are ready to retire. If they do not plan early enough, it might be too late to come up with some tax-saving strategies that would save your heirs from a pile of payments later on.

It is advisable for business owners like you to pass their company to their heirs as early as possible, partly because a company is likely to be worth less earlier on, which would make it less costly once it is transferred. For instance, if you wait for your $1 million business grow to $50 million, giving it to your children would cost millions in gift tax.

Here are some preparations that you should do to make sure the company stays in the family.

Transfer percentages to your heirs early on - This should be done as soon as your business is established. For instance, you can keep 70 percent of the business and retain complete control over everyday operations, while creating a trust fund for each of your three children with the remaining amount at 10 percent each. Although you still have to pay the gift tax, but this transfer would save you a considerable amount of money.

Sell discounted shares to your children - This is like lending money to your kids to buy interest in business. The sale can either be in exchange for cash or promissory notes. Also, if your business constitutes more than 35 percent of you adjusted gross estate and you own more than 20 percent of the company voting shares, your heirs can pay estate tax in installments

Transfer the entire business to a charitable remainder trust - This process is called "charitable bailout", which pays income to designated beneficiaries during their lifetimes and donates the remainder to charity upon their deaths. This means, your business goes in trust, while your children buy a life insurance for you. They will then use the life insurance proceeds (once you pass away) to buy the business from the trust.

Estimate the share of your heirs accordingly - This is especially true if only one of your heirs would end up working in the business. If, for example, the shares of all heirs are equal and with only one active participant, he or she may feel cheated by the fair split. It is recommended to retain at least 51 percent of the business until they are sure of which child is up for the job.

Make sure your heir is interested about the business - A huge loss would ensue if, for example, a huge real estate business was passed over to the owner's son who merely wanted to illustrate for comic books.

Ask for help from your lawyer - Any plan should be developed with a qualified estate attorney. Placing the company in on an irrevocable trust may save you on estate tax, but would leave your heirs on major cleanup very early on.