Business succession planning
Your business is often your life’s work. Most of the time it is also a key factor in your retirement wealth plans too.
So ensuring you have a proper family business succession plan in place will mean your business moves ahead and protects the dollars you have worked so hard to achieve.
The type of business structure you operate in your business is a key factor to consider in successful business succession planning.
Structuring is the core foundation of a successful business. Comparing the types of business structures and getting this part right for your business is critical to your business growth being supported. If you get this wrong, you risk an increase in personal liability.
The main business structures in Australia include:
- Sole Trader
- Family or discretionary trust
- Unit or fixed trusts
- Hybrid trust
- Religious Trust (our terminology to help make tithing deductible)
- Superannuation fund
Each structure has its pros and cons with a sole trader or partnership being the easiest to set up but with an increased risk of having your personal assets on the line.
Considerations when choosing a business structure include administrative costs of the business structure you choose, legal liability, tax optimisation and asset protection.
Modoras can advise you on a business structure that best suits your business needs.
What is succession planning?
You’ve spent years making decisions in your business to get it to where it is today. But have you considered what would happen if you were no longer able to work in the business? Or if you decide you would like to retire and enjoy the fruits of your labour.
It’s not always nice to think about one-day handing over the business you have worked so hard for to someone else. It can be an uncomfortable topic and one some business owners don’t want to think about, but a business succession plan is a critical part of running a business.
The reality is one day your business will reach a point where you have to step away. Being prepared mentally as well as practically can make the transition out of the business a lot smoother.
Start to think about what your business might look like without you in it. Would it be sold to another business or a business partner? Will you pass it on to a family member or sell it to a current employee? Do you still have any control over decision making or keep a financial stake in the business? What will the transition period look like?
These are all good thing to start the thought process of business succession planning before looking at more of the practicalities of how you would implement such a change.
Establishing what your business is worth is usually something that would be done at this stage as well as starting a conversation with a business planner or accountant. Someone who knows about business valuations and will be honest with you about your prospects.
Done right, business succession planning can take months, or perhaps even years of planning and preparation. A business planner or accountant can help you prepare and make succession planning feel less daunting.
If you’d like to know more about where to start with your business succession planning, get in touch with the Modoras team today.
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