You spend most of your time working in your business. If you are very organised, you may even spend some time thinking about how to sustain and grow your business. But how much time have you recently spent thinking about how to protect the wealth that you are building in your business, or how to realise and pass this wealth on?
This is what business succession planning is all about.
Business succession planning is part of the answer to the “why” of business, rather than the “how”. Why did you take the risk of buying or starting up your own business? Why do you spend every waking hour working in or thinking about your business? Why are you building wealth within your business? Common answers include: “to support a lifestyle”, “to ensure a secure retirement”, “to pass something on to the next generation”, “to build something lasting and of substance”, “to leave a mark”, “to do my bit for the community”. If these are the reasons why you are in business, then succession planning is a very important part of what you do.
The best time to think about business succession planning is before you go into business. But there is never a bad time to start. We generally turn our minds to succession planning when an unexpected event occurs – a law suit from a disgruntled customer, an acrimonious divorce, the death of a good friend at a young age, or a falling-out with a long-standing business partner. The difficulty with this timing is that our planning is then reactive, and the outcomes are often compromised.
You need to find answers to the following questions…
- What would happen if I was sued right now (either personally or in my business)? How well are my personal and business assets protected from unjust claims? What would be left over, and how would I rebuild?
- What if I want to (or have to) sell my interest in my business – would I get a fair deal from my business partners, or will they get a bargain? Who are likely alternative buyers, and how would they fund the purchase? How do I find out what my business is worth?
- If I sell my business, either to a third party or a family member, how much tax will I pay, and am I appropriately set up to qualify for any tax concecssions?
- If my spouse dies, will I have sufficient resources to look after the kids, keep the business running, and meet my other current and future commitments?
Business succession planning involves detailed consideration of a number of commercial, legal and financial matters.
Business succession planning is not simple, but neither is rebuilding a business devastated by a legal claim, or dealing with a business when a principal has suddenly died or is in the middle of an acrimonious divorce. Such occurrences are not as theoretical as we would hope.
If you are not able to satisfactorily answer any of these questions, chances are you are in need of a Mid-Life Legal Check-up™. A Mid-life Legal Check-up™ will provide you with a structured way to work through these issues:
- To identify which issues are relevant for you; and
- To provide you with a complete plan to ensure your affairs are in order.
