Succession planning, have you considered the tax implications?
It is never too early to start planning for the succession of your family business; maybe one child will leave the nest to follow their dreams and return to the family business with valuable practical business experience whilst others would prefer to have a distant involvement as minority shareholders (or sleeping partners) or no involvement at all.
There are many issues that will need to be discussed and addressed over a number of years to ensure your business continues to thrive for the next generation and beyond. Directors and Partners should prepare a family constitution which addresses;
- where the family want to be over a specified period of time, their aims and objectives as well as recognising the conflict that may hinder their plans
- who does what in the business, how long should they carry out that role for and recognising when other support is required
- succession, exit and retirement plans
There is normally a transitional period where the control of the business steadily passes to the next generation. Successors will welcome guidance and support especially when large decisions are made but this transitional period can often last a number of years and conflict may occur.
There will also be financial decisions to be made;
- will the older generation be relying on the business to provide for them in their retirement?
- will the business need to be restructured to give the next generation control?
- are all your children to be treated fairly but not necessarily equally?
Most of the taxes will need to be considered at every stage. Don’t shy away from using trusts if protection is required.
Handing over the family business is complex and risky, call Lawrence at CKLG on 01223 810100 to discuss your succession plans.