Succession Planning Passing on the Family Business
As experienced business and taxation advisors we see firsthand the practical difficulties in successfully transferring the family business to the next generation. Much of it comes from lack of communication and planning. Research shows that only 25% of family businesses successfully pass onto the next generations. However, if succession is looked on as an opportunity for capitalising on the goodwill the business founder has built up over the years things can work out very nicely if the correct steps are taken.
Succession should be a key element to be addressed as part of the ongoing business planning for family businesses. The future roles of the successors must be addressed from on early stage. The business founder should make it clear to the family his thoughts, hopes and aspirations for them and the business. Often the founder is inclined to say nothing and hope it will all work out later. Consideration from an early stage starts with Initial training and education outside of the business for the next generation. Then how will they fit into the business initially and what is the progression plan and achievement milestones to be reached. There should be a seamless progression plan which eventually leads to a changing of the leadership and this should be transparent to all in the business.
The current economic environment may result in increased pressure on founders to find roles for his/her offspring in the family business . This of course can be tricky as unexpected personal circumstances of family members can result in those family members being employed in an unplanned way. This can lead to friction within families later on and ‘who’s entitled to what’ arguments. Irrespective of the current circumstances it is essential that the founder works towards his / her long term business and family goals.
As mentioned in previously articles, now is a good time to be looking at secession. With current low asset values, tax charges resulting from transfers can be kept to a minimum. In addition it is no secret that the government are planning to restrict or eliminate existing tax reliefs available to family business on business transfers and retirements. The cost for the average sized business could be substantial.
By taking appropriate professional advice now as to the available tax structures and reliefs, business owners can save substantial tax charges later.
Protect the Family
Too many business owners are so caught up in the business that they tend to ignore or defer until tomorrow how they will deal with family member’s future involvement or take over. This is not wise and apart from the financial cost down the road, worse still it can lead to family disputes or even fall outs. For over 20 years O’KellySutton have advised business owners on succession and we have yet to have someone tell us that they started looking at this issue too early. Contact: Pat Sutton, O’KellySutton, Chartered Certified Accountants, Taxation and Business Advisors, Sutton@okellysutton .com