What do we mean by ‘business succession’?
Succession is the passing of something from the current holder to the next holder: you might think of it as a baton in a relay race. Sometimes succession happens in an orderly, planned way – and on other occasions, it is thrust upon us. Business Succession is no different: we can plan for it; or we can wait for events to catch up with us: what we are talking about is passing your business interests on to the next owner, whether the be family member or a purchaser.
When does business succession occur?
The two main events for which Business Succession Planning is undertaken, are:-
- ‘retirement’ (see more below); or
- death.
‘Retirement’ in this context, could mean termination of an involvement with a business due to a number of possible reasons, including:-
- Changed circumstances/ interests (‘moving on’, as they say);
- Incapacity (physical, or mental);
- Bankruptcy; or
- Age-based.
By planning for these events they can occur without significant disruption to the business itself – or to your personal financial well-being. By having plans in place, the circumstances can be reviewed and the appropriate strategy implemented so as to facilitate an orderly ‘passing of the baton’ to the successor business operator.
What does business succession planning entail?
Business owners, whether operating single-family businesses, or are in partnership with others (whether incorporated or not), are encouraged to ensure that succession plans for the business are clearly documented – supported with all necessary agreements (and risk insurance where appropriate) – for the guidance of those who follow. Typically, a business succession plan will incorporate –
- both a partners/ shareholders agreement; and
- a buy-sell agreement. (The buy-sell agreement will usually be funded with relevant and adequate insurance policies. Refer to our article Buy-Sell Agreement cover for more on this matter.)
The other important element of business succession planning is the strategic plan for the business. Whilst this is an area for accountants, business consultants and other specialist advisers, a strategy working towards having a business that is profitable, sustainable and saleable will make the task considerably easier.
What to do next:
Continuum Financial Planners Pty Ltd can advise you on actions and/ or legal advisers who can assist with the preparation of the appropriate plan for your circumstances. Our experienced wealth management advisers can also support your plans with advising on – and recommending, appropriate insurance policies to meet various aspects of the business succession strategy.
To arrange a meeting with one of our team, call 07-34213456 or use the Contact Us facility for prompt attention to consider the steps to secure your financial future in respect of your business operations.
We thank McKays Solicitors for allowing us to base our article on this topic on material found in their website.[This article, originally posted in January 2010, has been updated as at January 2014.]
