Secure the Future with Proper Business Succession Planning Advice

Most business owners have dedicated a vast majority of their life to building up their business. If you are a business owner, it can be difficult to envision your business without your involvement. You may have vague plans about passing your business onto your children or other family members, however business succession planning requires more forethought in order to minimise complexities. If not adequately addressed, tax liabilities and differing priorities amongst family members can impact a business’s success upon ownership transferral. In order to ensure continued success and to mitigate any potential risks associated with transferring your business to another party, it is important to first secure advice from business succession planning lawyers.

If you are in need of business succession planning consultants in Sydney, or for further information in relation to business succession planning advice, please do not hesitate to contact any member of our Commercial Law Team.

How business succession planning lawyers can help

Succession planning lawyers can assist you in creating a succession plan that will protect both your family and your business. Attentive business succession planning advice will minimise or avoid the negative consequences of the owner leaving the business due to death, illness or retirement. In Australia, family businesses possess a combined multi-trillion dollar net worth, constituting around 67% of all Australian businesses. This means that one day, the controllership of these businesses that make up the backbone of Australia’s economy will be passed down to the next generation. 

Business succession lawyers can smooth this process by assisting with the following issues associated with succession:

  • Insurance planning
  • Advising on and drafting shareholders’ agreements
  • Wills
  • Managing debt
  • Family financial advice
  • Ensuring effective tax planning
  • Personal estate planning
  • Transitioning equity ownership
  • WHAT IS BUSINESS SUCCESSION PLANNING?

    An often overlooked aspect of owning and running a business is what will happen when you no longer want to be involved.

    Business succession planning describes the process of solving this issue by arranging your business’s affairs to simplify any complexities associated with a transferral of ownership.
    When you are the sole owner of a business, stepping away from your business and choosing a successor can be relatively straightforward. You can generally choose when and how to wind down the business or transfer it to another person, whether that be your family, employees or a third party.

    Things get more complicated, however, when two or more people are running a business and one of them ceases to be involved, whether voluntarily (e.g. retirement, resignation), or involuntarily (illness, disability or death). It is at this time that it is vitally important to have a clear succession plan in place to ensure that both the leaving person and the remaining one’s interests are properly protected.

  • FAILURE TO PLAN

    Failure to plan for these events can have some fairly unpleasant consequences. For example, a retired person may retain the rights to dividends, even though they are no longer doing anything to generate profits. As another example, a deceased person’s interest in the business may pass to their next of kin, who will then have rights in relation to running the business, regardless of the intentions of the remaining owners. 

    Choosing a successor is an integral part of the business succession planning process. If an owner is forced to leave their business before naming a successor due to illness or death, this can create a leadership vacuum. Leadership vacuums often result in executives engaging in power struggles, resulting in a volatile environment that hinders subordinates and employees from working properly.

    In order to mitigate these risks we advise our clients to put into place agreements to cover what will happen in the event of one business owner ceasing their involvement with the business. This may involve any one or more of the following:

    • Profit entitlements and/or shareholding being tied to involvement in the running of the business;
    • Forced sale of shares if a business partner ceases their involvement in the business;
    • Forced sale of shares on death or permanent disability, often funded by insurance.

    What is vitally important is that these matters are addressed early in the business life-cycle. Waiting until the relevant event has occurred will be too late to put in place effective and balanced plans to appropriately deal with these exit events.

    If you are a business owner, it is essential that you seek advice from business succession planning lawyers to ensure the future security of both your interests and those of your company. Our expert succession planning lawyers have extensive experience in advising on the different aspects of succession. Get in touch with our team for an obligation-free consultation on how business succession planning could be incorporated into your company. 

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