The aim of succession planning is to pass on a business to new owners in the smoothest way possible. The broad principles are the same for all businesses; however, the process might be a little more emotional or complicated for family businesses.
If you are keen to keep the business in the family there are two areas to think about: management transition and ownership transition. Although there is often overlap between the people involved, the new manager is not necessarily the new owner.
It could also be multiple family members or individuals that you wish to pass your business too. If that’s the case it is worth considering to complete a business restructure to give each individual their individual responsibilities.
The structure of this transition can proactively be used to provide formal or informal protection, if required, for the exiting parties. It can also provide a framework for value to be paid by the business to the departing owners without the need for external funding.
Changing ownership can result in tax implications and opportunities depending on some of the decisions you make on how the changes will occur. Planning and preparation is the key to success. Do you need to arrange training for the incoming people? Will you share the news with customers? You need to plan how you communicate these changes with all stakeholders in the business, particularly if your business relies heavily on your personal skills or reputation.
Succession planning is a complicated area of business and tax planning. Starting these conversations early can make sure you and your family are in the best possible position as well as the business with the next generation of owners.