Putting the success into Succession Planning
PUBLISHED: 16:30 08 October 2015 | UPDATED: 16:30 08 October 2015
Building a business takes years of your life, so what happens when you're ready to hand it on? We talk to BPE Solicitors' Private Client team to find out
You spend your working life building up your business. It’s part of who you are. At times it’s probably taken over your life, even more so if you run or work in a family business. But what happens to the company you’ve created when you’re no longer at the helm, whether it be due to retirement or unforeseen circumstances? Who would you want to see at the head of your company? Have you taken steps to make sure that person is given control and not someone else, who may not be as capable?
Only 30% of family businesses survive into the second generation
According to research from Close Brothers Asset Management, almost half of British small business owners hope to pass on their business to their children, but although people are considering succession plans, many are not aware of the tax implications. According to the Institute for Family Business, there are three million family businesses in Britain and each year some 100,000 family firms are thought to pass from one generation to the next.
However, succession statistics show that only 30% of family businesses survive into the second generation, 12% are still viable into the third generation, and only 3% of all family businesses operate into the fourth generation or beyond. Research indicates that family business failures can essentially be traced to one factor: an unfortunate lack of family business succession planning.
Bearing that in mind, succession planning should be a priority in every family-owned business. Creating a proper succession plan can ensure you retire in comfort and that the business you’ve worked so hard to build continues to grow.
There are three key elements to succession planning: ownership, management and tax savings. BPE Solicitors works with many family businesses throughout their entire life stages, and business succession planning is just one area in which they have a great deal of experience.
All majority shareholders should think about a corporate will
“Just as your Personal Will documents what happens to your personal estate when you die, you also need to consider, what happens to your business interests,” explained BPE Partner Clare Young, who heads up the firm’s Private Client team. “All shareholders should think about a ‘Corporate Will’, to look at protecting those business interests for preferred beneficiaries and ensuring the right people make decisions on your behalf if you are out of action for whatever reason,” Clare added. “If shares pass to someone who has no interest in the business, problems can occur.”
Of course relationship changes within the senior business team can also affect succession planning. Divorce and re-marriage can have a part to play on who becomes involved in the company if this has not been addressed correctly.
Business succession planning
BPE’s Corporate Will service is broken down into two phases. Phase 1 reviews any existing plans to see what protection is already in place and Phase 2 suggests ways to strengthen and fill any gaps that may become apparent.
As part of the initial review, the Corporate Will team looks at all shareholder agreements, restructuring where necessary as well as making Powers of Attorney for both corporate and personal decision making to ensure your business and personal interests are protected, should you (or your co-shareholders) lose the ability to make decisions for yourself.
The team can also assist in creating a Business Succession Plan which will:
• Realise your assets in the business at a time when you or your beneficiaries need them.
• Give your business every chance of survival when you, or your partners, are gone or suffer long term illness.
• Ensure that families related to the business receive adequate compensation for the true value of their interest in the business.
• Fund the transfer of business interests to ongoing partners.
• Avoid you having to run the business with someone not of your choice.
• Provide a ready market for your business interests
• Structure your affairs to reduce unnecessary capital gains tax, income tax and inheritance being paid by your beneficiaries. The Corporate Will team also undertakes a review of property ownership , makes sure your Will is up to date and looks at personal assets for the purposes of inheritance tax planning, to ensure all your interests are fully protected should you die. And if you’re planning to marry, live with your partner or considering a divorce, the team can ensure you, your beneficiaries and your assets are fully protected.
With BPE at Work, staff have access to the very best legal advice.
BPE has introduced a new service that owners can implement across the business. BPE at Work provides a bespoke service for directors and senior managers which looks at inheritance tax planning, wealth and asset preservation for the next generation, pre-nuptial and post-nuptial agreements and support with relationship issues.
With BPE At Work, your staff also have access to the very best legal advice covering a wide range of services, from buying and selling a home, making a will, arranging power of attorney and family breakdown.
Part of the service includes a regular clinic held at your offices where employees can speak directly to a lawyer about any concerns they may have.
BPE also provides a website which can either stand alone or sit within your intranet, so staff can access key information on legal issues and direct access to lawyers.
Employee benefits are a powerful tool for attracting and retaining the best staff and providing staff with expert legal advice at very competitive rates can form part of a very attractive benefit package.