Estate planning involves identifying assets and putting in place the necessary documents to pass control of those assets.
Individuals who own and operate a business often will consider their personal estate planning by preparing a Will and powers of attorney but overlook business succession planning.
Passing control of business assets should be included in the estate planning of business owners.
Recognising the influencing factors in business succession planning and associated risks is a key starting point.
Some of the factors that influence business succession planning include:
- the legal ownership and structure of the business;
- legal consequences of transferring a business;
- the tax implications of transferring a business;
- the politics within the business;
- whether it is a family business and is intended to remain a family business;
- when and to whom control of the business is to pass;
- the existing constituent documents and other agreements of the business;
- key personnel and drivers of the value of the business;
- the level of understanding about the business and the business structure of the persons to whom the business may be transferred;
- whether there is a conflict between what is written on paper and what it intended to occur and can this be resolved.
More importantly, some of the risks in failing to plan include difficulties in:
- transferring ownership;
- preserving and increasing the value of the business;
- dealing with unforeseen events.
For example, a person may have gone to considerable trouble to establish particular legal structures for operating a business but has failed to properly explain those structures to members of the family with the result that disputes arise between members of the family.
For some business owners, a business succession plan may involve a gradual transition in passing control whereas for others it may involve a swift exit strategy.
As a legal practice that focusses on estate planning and tax, Bernie O’Sullivan Lawyers is well placed to properly address the issues that arise in planning for business succession.
If you wish to obtain further information about business succession planning for the business of you or your clients, please contact Patrick Cussen on 1300 267 529.