Succession planning can seem daunting, but there are things you can do to make the process much easier. If you want to pass your family business onto the next generation, there are a few things you need to think about.
The first is finding someone in the family who is willing and able to take on the responsibility. But there are also many other factors to consider, such as taxes, finances and management. You’ll need to consider all of these if you want the succession to succeed.
Tax implications of succession
When you transfer your family business to another person, you may have to pay taxes like Capital Gains Tax, wine equalisation tax, fuel tax credits, and excise duty. You need to be aware of all the possible tax implications before you decide about transferring the business. You should also consult with the ATO to see if you are eligible for any tax concessions or have your accountant do this. Make sure you document all the business changes and their tax impact in your succession plan.
1. A family trust is a great option when succession planning
If you want to give your business to a younger family member, you can make them a manager first to see if they are good at the job. If you want to give the business to them but keep some control, you can use a family trust. This is when someone else is in charge of the business assets, but you can still step in if needed.
Family trusts offer tax benefits and concessions that can be helpful for people who are looking to semi-retire or reduce their involvement in a business while still having some control.
2. Consider creating a family constitution
A family constitution is essential to make the hand-off of a business go as smoothly as possible. All the family members involved in the business, both directly and indirectly, should create the document. The constitution should include a detailed business plan specifying the goals and outcomes of the business.
It should also have a hierarchy of the business, both present and future. Additionally, it should have a will of the business, specifying what will happen to the company when someone in the family dies. Finally, there should be a code of conduct for interactions between family members in the business, outlining how they should behave towards each other.
3. Develop a succession plan to succeed
If you want to make sure your business is successful after you’re gone, you need to have a succession plan. This plan should include everything needed to transfer the business to a successor successfully.
a) Choose an appropriate successor in your succession plan
Suppose you want to keep your business in the family. In that case, you need to make sure that the person who will be taking over is skilled and ready for the responsibilities of running the business. Consider the best path for the business.
b) Get the business valued
You can understand how much your business is worth by getting it valued. The value of your business may change over time before you plan to sell it, but having this information can help you with your succession planning.
c) Keep your plan current
Review your plan regularly because your circumstances and the business’s circumstances may change over time. An up-to-date succession plan means you will always be ready if you need to pass the business on earlier than expected.
d) Make the final handover
If you have done all of the necessary preparations and you are ready to hand over the business, then you should be able to step aside without any significant problems. A clear and current succession plan will help make the transition smoother and less likely to cause disruptions in the business’s everyday operations.”
If you’d like help with your succession planning, Float Accounting can help.
The information contained in this publication is for general information purposes only, and does not take into consideration your individual circumstances. You should obtain personalised professional advice before acting upon any information contained herein. To the maximum extent permitted by law, we accept no responsibility for any loss incurred by any person directly or indirectly due to any action taken or refrained from as a consequence of the contents of this publication.