You’ve spent years building up your business, but have you given any thought to what will happen when you want to slow down a bit or when you die?
Succession planning is about having an exit plan. If you have one of these in place you can sit back and focus on your business, knowing that whatever occurs in the future there are plans in place to take care of things.
First of all, you need to think about what you want to happen. Do you have children to take over your business? Are they able to? Do they want to? If you have more than one child, do you want all your children involved? Should they own it and someone else manage it? Should you sell it?
Depending on what you want to do, there are different things to think about. If your goal is to sell it, then you want to focus on making it as healthy and profitable as possible to ensure a good price when the time comes.
If you are handing the business down, you still want it to be in good shape, but you also need to start thinking about who will take it over. What training do they require and do you need to mentor them?
It’s obviously very important to have a Will in place. This will carefully detail how you want the business to be passed on and protect it from inheritance tax. Your business assets may qualify for relief from inheritance tax or there may be things that you can do to reduce the impact of the tax. Business Property Relief (BPR) in relation to inheritance tax will, in many cases, reduce the value of a business and its assets for inheritance tax purposes when you die.
Whether your business qualifies fully or partially for BPR will in many situations only be qualified on death, but there are many ways to protect the relief during your lifetime, but you will need to take professional advice. One of the crucially important factors is the provisions set out in your company documents, which should also be reviewed by a relevant professional from an estate planning perspective.
Depending on what happens to your business after your death, the proceeds of the business could one day become taxable for your beneficiaries, so it may well be appropriate to establish a Business Trust to ensure that the relief is protected.
If your family would rather receive money than the responsibility of taking over your company, then it may be worth considering a share purchase agreement. This allows surviving business owners to buy your shares if and when you die. However, again, this should be set up by a qualified professional, as certain types of provision will automatically disqualify your estate from receiving BPR at the time of your death
There are different approaches that can be used to ensure that your business is protected for your beneficiaries, but the options must be carefully considered and professional advice taken, to ensure you do not inadvertently create a tax liability where there need not be one, and to ensure the continuity of the business – for however long is intended – after your death, to maximise the benefit to your loved ones.
Heir Tight Wills helps clients put in place robust provisions and valid documents, to protect their loved ones and their assets both – both personal and business – during their lifetime and after their death. For a FREE Consultation to discuss writing or updating your Will & estate planning provisions, contact Rachael Rodgers on 0845 519 7585, or CONTACT US via email.
