Business Law: Lindsay Sharples on how to make a success of your succession
- Credit: Archant
For many people, the shares you own in the family business are your largest and most valuable asset.
You and past generations of your family will have worked hard to create a long-term profitable business so it is only natural to want to protect this for future generations.
However, business owners tend to put succession planning on the back burner. This may be because you are too focused on building up and running your business to consider this section in your disaster plan. Or maybe, you don’t know where to start and what your options are. However, timely and careful planning is crucial to protect your business and maximise its value for your estate.
The main difficulties in succession planning are the variables: you do not know what your and your family’s personal circumstances will be; you do not know how your business will change; and we do not know what the tax rules will be. You might, therefore, want to consider leaving your business assets by your Will into a flexible trust, rather than outright to named beneficiaries. This will mean that you can:
: : Appoint the right people to decide whether to sell your business or retain it as an investment, and how to maximise the returns for your family;
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: : Protect your business from falling under the control of beneficiaries who may not be willing or have the time, energy or skills to oversee the running of your business;
: : Avoid a piecemeal division of your business between the beneficiaries on your death ? instead all of your chosen beneficiaries can enjoy the on-going profits;
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: : Balance the needs of those beneficiaries already involved in the business with those who are not;
: : protect your business from third party claims on your beneficiaries’ estates; and
: : save tax.
If you are married, this Will structure is particularly tax efficient because if you give the family business outright to your widow(er), you could be squandering Business Property Relief, a relief from Inheritance Tax which applies to business assets provided certain conditions apply.
Also by leaving your business into a flexible trust you can protect it in case your widow(er) remarries.
Business succession planning is often much easier and less stressful than you anticipate and the result will give you the peace of mind that the results of your hard work will be better protected for years to come.
:: Lindsay Sharples is a solicitor in the private client team at Barker Gotelee.