Succession planning is complex.
Failing to plan for your retirement or death can trigger significant loss in value to the business. If you want your business’ value to remain intact it is best to review your succession plan as soon as possible. The reasons why you have put off your succession plan are not as important as the reasons you should embrace it.
Family owned or controlled businesses have an additional personal element to consider, a deep emotional connection with the business and who to pass it onto.
Here are two main questions to help you start planning for your business’ succession:
- Who do you want to take over your business?
Your successor should have the skills and/or desire to take over your business – this could be a family member, employee, business partner or an outside buyer.
Your priority may be long-term success of the business, or it may be preservation of family wealth through estate planning. Depending on your goals, the business succession plan will vary.
Strategic succession planning can become even more complicated when family issues are at play: personalities, communication, legacy. If you are thinking to yourself: “No, mine is simple” I ask you to reflect on this question: “Even without disagreement among those involved, do the goals of the business align with the goals of the family?”
Time to Plan:
- Define your goals
- Look at your estate and gift planning
- Set up your life insurance policies & beneficiaries
- Define family officers to appoint
- Business strategy
- Corporate restructuring
- Retirement planning
- What do you need to consider?
Valid legal agreements
Do you have any existing legal documents that set out the terms of succession? If so, have they ever been independently reviewed? If not, is it best practice to review your structure to work out if any legal documents are required.
Valuing your business early and regularly gives you clarity as to how much the business is worth, which helps identify any changes you want to make to your succession plan.
You need to consider your estate planning. Your will only deals with assets held in your personal name. Who you leave your personal assets to may be influenced by who is inheriting your business.
Succession can be built into your trust deed, which if structured correctly can save you tax and legal fees.
A clear and early strategic plan will foster the longevity of your business.
C Legal & Co encourages collaboration with your team of trusted advisors (ie. accountants and financial planners) to help you make the right decisions for your future.
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