What’s your plan?
19 May 2014
We all know that the corner stone of the Northern Ireland economy has always been the number of small to medium sized family owned businesses. According to the 2012 figures published by the Office of National Statistics only 3 in 10 of us have a will and whilst it’s frightening to think that a similarly small percentage of our family owned businesses have undertaken any form of business succession planning, I guess it’s hardly surprising bearing in mind that the process can be both technically and emotionally difficult.
Sometimes the transition happens quite naturally for the first generation, particularly if the children have been involved in the running of the business, but can then become trickier for subsequent generations. Sometimes the family decides, for a variety of reasons, to sell the business to a third party. Sometimes the preference is to hand the reins over to the management/employees.
Whatever your eventual plan, good succession planning can require the careful balancing of various objectives including:
- Ensuring the continuation of your business.
- Providing an inheritance that helps your children lead their own lives and pursue their own careers whether within the family business or otherwise.
- Protecting the wealth of both your business and your family.
- Ensuring family harmony.
It can also mean tackling some very difficult issues:
- Is the next generation ready and/or able to take on the responsibility?
- What if only some of them are?
- What if none of them want to work in the business?
- Do you want to pass your wealth on but stay in control of the business?
- Do you want to skip a generation and provide for your grandchildren rather than your own children?
- What if one of your children gets divorced?
One of the most useful and versatile means of addressing these kinds of issues is the trust as it can be used to:
- Separate management and ownership of the business from those benefiting from its success.
- Control the destination of assets, including shares in the company.
- Protect the interests of the younger members of the family.
- Mitigate tax liabilities.
- Maintain control.
The earlier you start to plan for succession, the more likely you are to achieve your own objectives, get a tax efficient plan in place and navigate the difficulties of juggling competing family interests. It also gives the whole family time to buy-in to your plan making it easier for you to manage everyone’s expectations for the future.
So………. what’s your plan?