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Business Succession arrangements

.. a planning opportunity for collaboration between your financial planner, your accountant and your lawyer

Formulating Business Succession arrangements is an important process that should be undertaken by all business operators – whether the business operates as a sole trader, partnership, trust or a limited liability company.

In a nutshell, business succession planning provides a strategy: it documents what is to happen in the event that the owners of the business decide to sell the business, retire, are critically injured/ become critically unwell, or die before being able to manage their way through a business transition. It is often referred to as ‘estate planning for business’.

Planning Business Succession provides for certainty for the stakeholders of the business entity and/ or its operations. In considering who the stakeholders are that will be at risk if a significant debilitating event occurs in the life of the key decision-maker(s) in a business, think about at least the following ‘groups’ –

  • family members;
  • employees;
  • financial institution(s);
  • customers;
  • suppliers;
  • landlord; and
  • yourself.

The timing of planning business succession arrangements is important

In a similar way that a personal Last Will and Testament should be written when a person has the mental capacity to undertake that role, Business Succession arrangements should be formalised whilst the business owner is fit, well and cogent. The sooner the planning is undertaken – and documented and implemented – the more secure the stakeholders.

Reviewing Business Succession arrangements

There will be events in the life of a business that will give rise to a need to considering whether the existing planning is appropriate to the changed situation. This is another similarity to the Estate Planning alluded to in the previous paragraph: just as marriage/ divorce, new children, increased wealth etc might trigger a review of the Estate plan, significant business structuring, financing and valuation changes should be seen as events that trigger a review of the business succession arrangements.

The elements of Planning Business Succession arrangements

The key documents that constitute a Business Succession Plan, include –

We also commend business owners to undertake an Estate Planning exercise: refer our article (from a series of thirteen articles on Estate Planning matters) – Estate Planning and Business Succession Planning – which will be of particular relevance to families in agribusiness ventures.

Who should be involved in planning your business succession arrangements?

Given that there are many elements to the process, there is likely to be a number of specialist advisers involved: depending on your circumstances these will include –

  • Accountant – to provide business valuation advice;
  • Lawyer – to advise on the appropriate terms of the agreements required to formalise the plans;
  • Financier (Bank/ Broker/ Lender) – to ensure any arrangements don’t breach existing ‘covenants’;
  • Financial Planner – to ensure that the relevant life insurance policies are acquired to secure any eventual funding requirements;
  • Other specialists as appropriate.

Who coordinates planning Business Succession arrangements?

Continuum Financial Planners Pty Ltd has a structured process by which to advise you on actions needed to be undertaken – and are able to refer you to specialist advisers who can assist with the preparation of the appropriate plan for your circumstances. We act for clients so as to coordinate the process, using your existing advisory specialists or referring you to others if appropriate – and monitoring the completion of all aspects of the process.

To arrange a meeting to discuss this matter further with one of our experienced advisers, please call our office on 07-34213456; or complete our Contact Us form on this website.

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