You spend most of your time working in your business. If you are very organised, you may even spend some time thinking about how to sustain and grow your business. But how much time have you recently spent thinking about how to protect the wealth that you are building in your business, or how to realise and pass this wealth on?
This is what Business Succession Planning is all about.
Business Succession Planning is part of the answer to the “why” of business, rather than the “how”. Why did you take the risk of buying or starting up your own business? Why do you spend every waking hour working in or thinking about your business? Why are you building wealth within your business? Common answers include: “to support a lifestyle”, “to ensure a secure retirement”, “to pass something on to the next generation”, “to build something lasting and of substance”, “to leave a mark”, “to do my bit for the community”. If these are the reasons why you are in business, then Succession Planning is a very important part of what you do.
When should I start Business Succession Planning?
The best time to think about Business Succession Planning is before you go into business, but there is never a bad time to start. We generally turn our minds to succession planning when an unexpected event occurs – a law suit from a disgruntled customer, an acrimonious divorce, the death of a good friend at a young age, or a falling-out with a long-standing business partner. The difficulty with this timing is that our planning is then reactive, and the outcomes are often compromised.
How do I start my Business Succession Plan?
You need to find answers to the following questions:
- What would happen if I was sued right now (either personally or in my business)? How well are my personal and business assets protected from unjust claims? What would be left over, and how would I rebuild?
- What if I want to (or have to) sell my interest in my business – would I get a fair deal from my business partners, or will they get a bargain? Who are likely alternative buyers, and how would they fund the purchase? How do I find out what my business is worth?
- If I sell my business, either to a third party or a family member, how much tax will I pay, and am I appropriately set up to qualify for any tax concessions?
- If my spouse dies, will I have sufficient resources to look after the kids, keep the business running, and meet my other current and future commitments?
Business Succession Planning involves detailed consideration of a number of commercial, legal and financial matters.
Business Succession Planning is not simple, but neither is rebuilding a business devastated by a legal claim, or dealing with a business when a principal has suddenly died or is in the middle of an acrimonious divorce. Such occurrences are not as theoretical as we would hope.
If you are not able to satisfactorily answer any of these questions, then we need to talk.
If you’d like to get started on your Business Succession Plan, call us today on 1300 654 590 and make an appointment.
Click here to find out more about how we can help you with your Business Succession Plan.
Click here to find out more about how we can help you with your personal Estate Planning needs.
WARNING & REPUBLISHING
This publication contains general information only, and is not to be construed as legal advice. Laws differs in each jurisdiction in Australia, and may be interpreted or applied differently depending on your location. This publication is not to be used as a substitute for legal advice tailored to your individual situation. Use of this publication does not create or constitute a solicitor-client relationship between Andreyev Lawyers and any user of this publication.
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The information contained in this post was reviewed on 18 February 2022