Keeping the business in the family when you decide it’s time to retire is a common decision for many business owners. However, ensuring that family business succession planning is carried out effectively is seldom done right. If you plan on handing your business over to your child/children or any other family member, there are specific precautions you should take to ensure that the process you use is not only compliant with Australian business and taxation laws but also ensures that the business model is protected in a way that you so wish.
Continue reading to learn more about family business succession planning and transferring business ownership to a family member.
3 Considerations of Family Business Success Planning
When changing ownership of any business to family or someone else, having meetings to discuss various aspects of the changeover helps create a seamless process. Meetings should be periodic and should not be over complicated by discussing too many aspects of the changeover at once. You should plan out what will be discussed at each meeting when you decide you are going to change over ownership.
When changing ownership of a business, it is always wise to consider doing so in a transitional manner. By using a transitional approach, it allows you to teach your children the ways of the business and the correct process of doing various tasks, in order to keep the business running the same as it always has.
This makes the change easier for customers and clients. After the transition has taken place, they can choose to make changes to the business model that they think will improve the business, but they will be doing so with an appreciation and understanding of why things have been done the way they have in the past.
3. Knowing the boundaries
One of the biggest obstacles for those considering transferring business ownership to a family member, particularly to children, is mentally preparing for what this change will mean. A common mistake many business owners make when handing the business over is thinking they are still in charge; this is not the case.
By overstepping the boundaries and trying to be over-involved after you no longer own the business, you can cause conflict between yourself and your child, which will inevitably impact negatively on the business. You need to respect your child as a business owner and let them run the business on their own.
Of course, you can be there as a soundboard and offer advice should they need it, but anything more can become overbearing. To avoid doing this, you need to prepare yourself for what no longer owning the business will mean; how are you going to fill your time that used to be spent working, goals for retirement and so forth.
Want to Learn More?
If you would like to learn more about family business succession planning or exit strategy business advice specific to your personal circumstances, please don’t hesitate to speak to our business accountants on 07 3391 1188 or send us an email today.
*** This publication is for guidance only, and professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication. Publication date April 2018
Updated 24 November 2020