Business Succession Planning
The importance of succession planning
Do you have a business succession plan in place?
It is important that you think about what is likely to happen to your business once you are gone. Your response may be that you do not care. However, most people who have spent a considerable part of their life building up a business do not want to see it dissipate or disappear upon their death. Succession planning is the key in this regard.
Issues in relation to succession planning include:
- deciding who is going to take over your business
- ensuring ongoing management capabilities
- ongoing funding
- your Will, particularly in ensuring equity amongst those members of your family who are not continuing in the business
- key man insurance
- customer/client management.
All of these matters can be dealt with in a well-drafted business succession agreement. We can help you draft such a document.
Business structure and succession planning
The business structure that you currently employ may be suitable for you, but is it suitable for your children or other successors?
Does the current structure of your business allow for those who are going to come in to learn the operation before you retire?
Are the financial arrangements with respect to your business suitable for succession purposes? Is it likely that those financing the business will ‘pull the plug’ on the business if you are not there? Have you taken steps to overcome such difficulties?
Does your structure allow for you to differentiate between, for example, the ownership of assets within a business, such as intellectual property, and the actual operation of the business and exploitation of the IP? For example, you may wish one party to own the intellectual property but another to exploit it.
What may be the capital gains tax effect of business succession and how may these be legitimately minimised?
An analysis of your complete business structure is a necessary part of any succession planning for your business.
Wills and succession planning
Have you made adequate provisions in a will with respect to your business?
A vital aspect of your business succession planning is the making of your will.
You should ensure that your executor is well aware of your business circumstances. You should also ensure that, in your will:
- there are powers and provisions allowing your executor to run your business after your death until it can either be handed on or liquidated to the maximum benefit of your estate,
- you have dealt with any power of appointment in a discretionary trust,
- you have been fair to those of your family not involved in your business on an ongoing basis,
- you have a workable arrangement should your business successors need to “pay out” your other beneficiaries
Learn more about our Wills and Probate services.
Powers of appointment
Do you have a will that deals with any powers of appointment you may be entitled to exercise under a trust?
In a discretionary trust, the power of appointment is the most important succession provision. The person or people with any power of appointment effectively control the Trust. As the Trustee controls the Trust, the person who appoints the Trustee has the ultimate power.
It is therefore essential that you ensure that the power of appointment is passed on to the correct people. If you have substantial assets in your trust, not dealing with the power of appointment can be more problematic than not making the Will.
Enduring Power of Attorney
Do you have an enduring power of attorney in place?
An enduring power of attorney is a document which allows you to appoint a person to look after your financial (including business) affairs when you are unable to do so yourself. It is an extremely valuable, indeed vital, document. Who will be able to sign cheques, sell assets, access bank accounts, sign important documents, deal with financiers and generally operate your business if you are unable to do so?
An enduring power of attorney is not an expensive document but it is a very significant one. We will be happy to take your instructions to prepare such a document.
If you do have a power of attorney, is your attorney the appropriate person to be planning your business in the event of your incapacity?
Does the person that you have appointed to be your attorney have the business acumen or capacity to run your business? If not, you should consider appointing a different attorney. Remember, this person will stand in your shoes with respect to your financial and business matters. They must know what they are doing!
Our Business and Commercial Lawyers
To make an appointment, simply call 1300 31 42 82 or email firstname.lastname@example.org