A survey conducted by Family Business Australia, KPMG and the
University of Adelaide's Family Business Education and Research
Group in 2013 revealed that of the 570 family businesses which
participated, only one third had formal succession or exit
strategies in place.
What happens if the unexpected occurs?
What would happen if the driver of your business dies or becomes
incapacitated or there is a need or opportunity to sell the
The vast majority of Australian businesses are conducted under
one of the following structures:
Family / discretionary Trust; or
Combination of the above, for example, partnership.
The choice of structure is driven largely by taxation
considerations, but with an eye on asset protection and operational
practicality as well. Another relevant consideration but one which
is often overlooked is the matter of transition to new ownership
whether that is within the family, to management or to a third
Failing to plan
There is a saying that "failing to plan is planning to
fail." Failure to hold the business in the most appropriate
structure and not having a suitable business succession/exit plan
in place can have serious consequences.
Consider a major disruption to your business such as the death
or disability of a key family driver or a marital breakdown of a
family member involved in the business. Or consider the opportunity
created by an unexpected offer to purchase your business. Is your
business ready for these types of events or is the only
succession/exit planning strategy your business has in place your
last Will and Testament?
Too often we find (as confirmed in the 2013 survey) that owners
of family businesses have not addressed these questions, resulting
in disputes and loss of value opportunities.
Is a Will enough?
No. A Will (although an important and valuable starting point)
only deals with property in your own name. Most of the matters
which must be addressed to successfully transition control and
ownership of your business will fall outside your Will.
If that unexpected event or opportunity has not yet arrived, you
should seek advice now and start to put suitable arrangements and
strategies into place. By all means begin with your Will, but the
process doesn't end there. You must make a plan with your
adviser. Failing to plan is planning to fail.
This article is the first of a three part series. The second
article will address the issue of transition and succession in a
business and the third article will address the legal aspects of
readying your business for sale (or operating it better now).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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If you are doing a Will, or you are the executor of a deceased estate, consider what taxes and duties could be payable.
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