Most small business owners are known for devoting a lot of time and effort to making their business a success.
Unfortunately not as many business owners put sufficient plans in place to ensure their business continues to thrive when they’re gone. Here’s why succession and estate planning are critical for business owners.
Staying open for business?
If you’re a small business owner passionate about leaving behind a strong business legacy, you need to understand that estate and succession planning go together.
In small businesses there often isn’t a clear distinction between private and business affairs. For this reason it’s important to have plans in place that take your personal and business circumstances into account and ensure business continuity when you exit.
Succession planning done in conjunction with estate planning is particularly important for family owned businesses.
Family members will not only be grieving but they may need to attend to immediate business needs for day-to-day operations and see to the management of the business. Inevitably they will also be dealing with social and emotional dynamics within their family.
Deciding who is best placed to take over the ownership or running of your business can be just as complicated.
Family members may not be willing or able to take on a busniess. Some family members may have been more invested emotionally and financially in the business than others.
These issues however can be avoided or mitigated through effective succession and estate planning.
A well thought-out succession and estate plan can help ensure a smooth transition and transfer of business ownership, support business solvency and continued operations and avoid family conflict and potential estate challenges. It can also put in place an exit plan for you and consider whether the potential sale of the business is a better option for you.
The planning process
As part of the estate planning process, a qualified professional will help you consider the assets and liabilities, ownership structures, insurances and asset value now and in the future. They will take into account how the the transfer and control of assets are managed to maximise the benefit to the deceased’s estate and beneficiaries.
Consideration should also be given to the most tax-effective financial structures for now and in the future, as well as how assets are and could be dealt with in a Will, trusts, superannuation and held within companies.
What next?
You should consult a Wills and Estate professional who can help you formally and legally document your business succession plan and your estate planning.