The future success of any business requires careful and considerate planning. Succession planning can begin years ahead of time and can prepare your business for future turnovers and any unexpected challenges by nominating and authorising different people to make decisions about your business and carry on the business’ vision.
What is a succession plan?
Succession planning is a complex process which helps business owners to effectively transfer their business to a successor. Effective succession planning eases the burden of this hand-over process and helps your successor prepare for their present and future work responsibilities.
To implement a succession plan for your business, a few crucial steps will help guide this process:
1. Choose a successor
This may be a family member, employee, business partner or outside buyer. It is important you identify and choose a successor with the necessary skills and experience to take over your business. A succession lawyer will be able to draft and implement a legally valid plan for your chosen successor.
2. Value your business
You should value your business early and regularly to determine its current worth and assist with your succession planning.
3. Create and implement a succession plan
Set realistic and achievable ideals, goals, and plans for the future of your business. This may include a short- and/or long-term timeline. A few legal documents and details may be necessary to dictate your company’s terms of succession. The two main factors to consider are the transfer of power (how management and control of the business will be transferred) and the transfer of assets (how the business’ wealth will be transferred to successors). A Power of Attorney document authorises another person, known as your attorney, to act on behalf of you regarding your affairs. A General Power of Attorney, often used in business contexts, comes into effect on a selected date and may limit the matters which your attorney may deal with. In contrast, an Enduring Power of Attorney, gives your attorney the authority to deal with all or part of your business matters, whether you are incapacitated or capable to make decisions. Your business’ succession plan may make reference to your Power of Attorney documents and/or a valid Will. The death of a business owner will result in a transition where assured leadership is able to be provided. A succession plan, including nominated successors and leaders, is essential to ensuring that any business reduces the negative impacts of the death of a business owner. As such, it is important to contact a qualified and reliable succession adviser to sort out your Will and Power of Attorney documents.
Further, the succession plan may be full or partial, and it is important to consider other tax-, retirement-, financial-, and estate planning issues.
4. Review your plan and keep it current
Review your business’ succession plan regularly – your circumstances and goals will change over time and it is important you seek professional help from succession experts to ensure your plan is valid and effective for your business model. Why is it important to have a plan in place?
Businesses operating without a succession plan can invite disruption, uncertainty, conflict and may endanger the business’ future competitiveness. For family run businesses, not having a succession plan in place may also cause unnecessary tension and emotional personal issues when introducing non-familial stakeholders into a business.
There are many other benefits for companies and owners who implement a valid and effective succession plan. These include survival and growth of your business after sale or restructuring, reduction or elimination of estate- and income taxes, facilitation of retirement for some employees and the ability to retain control of your company’s hand-over processes.
If you have made effective preparations, the handover process will much more likely be effortless and hassle-free. A clear and current succession plan will enable a smooth transition and cause fewer disruptions for your business.
Wills & Estates offers no cost, no obligation initial appointments so that you can find out about your business options and how much it will cost to set up your succession plan. We offer fixed fees and payment plans – your wishes, your way.
Don’t wait until it’s too late, contact us today!
Phone: 1800 22 33 90
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