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Business Succession

Working together to make your vision a reality

Whether retirement is 30 years away, just over the horizon or not in your game plan at all, a succession plan is vital to ensuring the continued success of your business.

At some stage you will decide to leave your business; perhaps you have decided to sell, retire or do something else. Regardless of the reason, having a succession (or exit) plan in place will help you to smoothly transition out of your business.

You can start succession planning years ahead of time; having a plan can be useful if there is an unexpected event, such as illness or death. Without a plan, the future of your business can be at stake. Early planning also helps you to maximise the value of your business.

Developing a plan

Make sure your succession plan is realistic and achievable. There are no set rules about what to include in a succession plan, however, you may want to include details of:

  • the successor; family member, business partner, other succession type; partial or full succession timeframe
  • key personnel changes and skill retention strategies restrictions
  • Legal considerations; buy-sell agreement, reference to a will risk management
  • communication strategy financial considerations; retirement income, sale price, tax implications.

Business Succession Explained

When someone has a company, small business or an organization that accrues revenue, he or she may be able to transfer the ownership of the entity to a family member when he or she reaches retirement or upon his or her death. This act is business succession planning, and it is important for those with a company that is still thriving rather than sell the business.

When someone has reached the retirement age and wants to rest and leave the remaining company that is still accruing revenue, he or she needs to consider a business succession plan. This is similar to estate planning, but this type of inheritance is an entire company that has methods and procedures already working for it that continue to sell products or services. This means, if the family member or dependent follows the same process that the owner has, it may be possible to continue with an entity that is thriving in the business world. The transfer of ownership may work similar to typical company sales with provisions, or the owner may give it as is without

When the current owner of the company has reached an older age where he or she may consider retiring fully without the need to remain the owner, succession planning is the next logical step. If the individual has no family or dependents, he or she may determine that selling the company is the better option such as to a partner or senior manager running the business. However, children that appear to be mature and educated enough in commerce or economics may be able to keep the organization afloat. Once it has been determined which option is the best, the owner then needs to start the business succession plan and ensure the right person is able to take over.

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Initial call

Get to know us, discuss your requirement confidentially and set a date for a no-obligation meeting.

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Discovery meeting

Meet with us for an in-depth discussion regarding your requirements. We will answer any queries you may have as well as listen to your specific needs. The coffee is on us.

Proposal & implementation

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Business Succession FAQs

When is the right time to begin succession planning?

It may be the case that you don’t plan to retire from the business for many years. But circumstances can change and the unexpected often happens. While we prefer not to think about it, family dynamics can be affected by events such as illness, death, divorce or disputes. These can often act as the catalyst for a handover of ownership. If you don’t have a plan in place, then you become part of someone else’s plan.

Giving yourself plenty of time to prepare your succession plan, perhaps setting a specific timeline, will allow for a smoother and easier transition and more effective sharing of the family wealth.

Can I protect our family wealth from inheritance tax?

Yes. HMRC collected GBP5.2 billion in inheritance tax payments in the last tax year, more than double the amount paid a decade ago1. While every citizen should pay their fair share of tax, is it fair on your children and grandchildren to deplete their wealth needlessly through lax or ineffective planning?

There are several effective ways to maximise the wealth retained in the family and to potentially minimise the amount of tax you need to pay. Strategies including the setting up of family trusts, restructured wills, lifetime gifts and deeds of variation can help protect some of your family's wealth from incurring unnecessary taxation? It is also possible to get tax relief against trading businesses and agricultural land which (provided certain conditions are met) allow assets to be passed on free of Inheritance Tax. Please seek advice and guidance from professional tax adviser.

What is the fairest way to share out wealth among my children and grandchildren?

The next generations of the family may have their own expectations about what they are entitled to when wealth is passed on. These may differ from yours and that can create tensions. In most cases, fair shares will mean equal shares since equitable distribution of wealth among siblings prevents conflict and resentment.

However, it may be that one child has invested their time, talent and effort in working in the business and increasing the family wealth while another has shown no interest and made no contribution. In this case, rewarding one with a greater share of the wealth from the business than the other may be deemed fair.

Modern families often embrace second, and sometimes third marriages, with stepchildren and step-grandchildren involved in the mix. This should be carefully considered in the decision-making process.

I know we’ll feel awkward discussing succession planning as everyone has very different views. How should I approach it?

Wealth and succession can be a taboo subject in many families with many preferring to avoid it. This may explain why only 16 per cent of family businesses have a written succession plan4. However, clear communication between generations – and a willingness to have those potentially awkward conversations – is essential. Families that talk to each other generally have smoother transitions than those who dodge the subject. It’s worth bearing in mind that parents routinely overestimate the clarity and quality of their communication with their children on family wealth matters.

Bringing in an external trusted adviser to facilitate family meetings allows all members to voice their views in a safe and respectful environment. Getting your professional advisers involved in the succession plan gives a clear, dispassionate view and reduces the emotional temperature to everyone’s benefit.

What’s the smoothest and most efficient way to manage the transition of the family business?

A carefully planned handover is vital to the ongoing success of the family business, but it can also have a big impact on relationships within the family. Where there are several children who wish to be involved, someone needs to decide who will take which role. There is always the risk that someone will feel left out. 'Eldest first' doesn't have to apply. The best succession plans are based on a cool-headed appraisal of the different strengths and preferences of the next generation of potential leaders. That might mean favouring younger siblings over elder siblings, skipping a generation or going outside the family to bring in professional management. The family can still retain ownership without being involved in day-to-day management.

Gaining clarity on how your family wish to proceed will result in structures being developed to meet their needs, and will also provide a framework for the governance they require to meet these needs. These will evolve over time and will have to be reviewed to ensure they continue to meet the requirements of the family.

Also, it shouldn’t be assumed that your children want to run the family business. They may see their careers developing in a different direction and may feel pressure and a genuine burden of being judged against their parents’ achievements. In such cases, an alternative exit such as a trade sale or a management buy-out would be a better way to transition the business.

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