Most of us have thought about (or put into place) personal plans in the event of our death, but how many of us are planning a business legacy?
If you are a company owner or stakeholder, it’s vitally important that you safeguard the future of your business as well as your individual assets, by putting a succession plan in place.
If you are yet to address your business legacy and create a succession plan, here are some steps you can take to ensure the process runs smoothly:
1. Clearly establish your company goals
Planning for the future is only possible if you know what that future is going to look like. Make sure that your company has clear, strategic direction for the mid to long-term future, and that all of your business partners and key personnel are bought-in to this strategy.
If you or a partner is nearing retirement, make sure this is factored into the strategy, along with the additional resources and/or cash flow that will be needed to replace their skillset.
2. Have a clear decision-making process
Even with a watertight strategy in place, inevitable plans will need to be tweaked as your company evolves. Make sure each stakeholder knows what their rights and responsibilities are, and don’t be afraid to put a clause in place for how to deal with disputes – a particularly sensitive area if you’re part of a family-run business.
3. Create a succession plan
Once you know where you’re going, how key decisions will be made to get there, and how you will deal with bumps in the road, then it’s time to start drawing up a succession plan.
You will need to identify who your (or your colleague’s) successors will be, both active and non-active within the business. You will also need to look at what wider support is required from the company to ensure their succession is successful.
4. Consider the financial impact of succession
When you or a partner hands over a share in a business, there can be financial and legal implications for your successor. Therefore it’s important to understand what will happen to those who take over the company not only when you transfer ownership, but also if the worst should happen and you pass away.
Many business owners choose to write succession into their will, which can relieve some of the tax burden; you may be able to gift your estate to close family members, for example. Talk to a financial advisor about the best way forward to minimise the costs of relinquishing your share in the firm, to avoid inadvertently burdening others.
5. Start the transition plan
The final thing to do when you know how you will be handing over your business to a successor is to put a timeline in place for this transfer of ownership. It is never too early to create a succession plan – far better to look at it now when you’re in good health with a long career ahead than wait until you’re trying to strike a plan under time pressure.
Consider that your successor may not be ready when you’re ready, so many require some time to get their emotional and financial ducks in a row. They may need to consider financing options to fund their acquisition, such as third party finance.
If you’re unsure about how to gift for your estate or if your children need help to set up ISAs and a pension, contact our financial planning team today.
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