Advice on Succession Planning

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Whether you are retiring, selling, or thinking about leaving your own business, a Business Succession Plan is a necessity for business owners, as it enables your business’ smooth transition over to its successor.

 

WHAT IS A BUSINESS SUCCESSION PLAN?

A proper Business Succession Plan is a plan that outlines the details of the handover of your business from you to your successor. A well-crafted succession plan is the key to preventing disputes arising out of your exit from the business. It also ensures that the transfer of your business to a new person is a successful one.

While it is not a legal requirement for a business to have a Succession Plan, it is highly recommended that businesses have a Succession Plan, as unforeseeable events may mean that you will have to transfer your business to someone else.

 

GLG LEGAL CAN HELP WITH CREATING A BUSINESS SUCCESSION PLAN

Effective succession planning can be difficult to implement on your own, which is why we suggest having an experienced GLG Legal business succession planning lawyer by your side throughout the process. Here are factors to consider when drafting a Succession Plan:

  • Business size, business industry
  • Business assets
  • Your current involvement in your business
  • Who will be taking over your business.

Your Business Succession Plan needs to be realistic and achievable. It should outline tax planning, significant roles and leadership positions (for family businesses this could mean selecting the next generation), exit strategies and business interests and objectives. 

With this in mind, there are a few steps involved when creating a Succession Plan, as outlined below. As with all legal documents, we always recommend seeking advice from a qualified lawyer who will be able to assess and ensure that all things necessary are included in the document and that no important things have been left out.

Most business owners should already have an idea of their succession plan, but for those who do not, GLG Legal is here to guide you through the process.

 

STEP 1: SELECT YOUR SUCCESSOR

Your successor is essentially the person you nominate to hand over your business to when the time comes. First and foremost, it is vital to select someone who has the time, dedication, and experience to spend on your business, as well as a genuine interest in the business. Many business owners often choose to leave their business in the hands of someone they know and trust to do so. Your successor may be a current or previous business partner, a long-term employee of the business, a family member, or even an outside buyer.

Whether you run a family business or not, for those of you who are considering leaving your business to a family member, it is vital for your Succession Plan to consider matters of inheritance, ownership, and management disputes of your business. It may be necessary to seek advice from a Family Lawyer when family relations have broken down.

 

STEP 2: CONSISTENTLY OBTAIN VALUATIONS OF YOUR BUSINESS

The value of your business is a fundamental factor in how your Succession Plan is drafted and it is also a key item for consideration in relation to many of the provisions contained within the succession plan. As the value of a business can fluctuate over time and your exit from the business is not determined, seeking regular valuations of your business is vital as this may mean that you will need to update your succession plan.

There are various types of methods in which you may obtain a valuation of your business. Expert advice from a professional is the best way to determine which type of valuation you should seek.

 

STEP 3: DRAFT YOUR SUCCESSION PLAN

Once you have determined who to appoint as your successor, the drafting of your succession plan may commence. It is important to seek the advice of an accountant for any financial risks that may arise in your succession plan. In terms of drafting the succession plan, our lawyers at GLG Legal have experience in drafting succession plans to a high standard where there is little room for interpretation later down the track.

Your lawyer will be able to provide you with unique advice to your business and situation however, things that you may want to consider when drafting your succession plan include the following:

  • Who is your successor? (i.e., one of your family members, an employee, or one of the remaining business owners)
  • When do you plan to leave the business (i.e., is there a set date or is it still up in the air?)?
  • What will be the responsibilities of your successor?
  • Will you be gifting the business to your successor or will there be a financial settlement of the business to your successor based on the valuation?
  • Will your successor receive any training for the handover?
  • Are there any legal requirements that need to be attended to?
  • Will your business retain the same business structure?

 

STEP 4: REGULARLY REVIEW AND UPDATE YOUR SUCCESSION PLAN

Whether your business experiences short bursts of change or consecutive changes, it is important to keep your Succession Plan updated. It is particularly important to review your succession plan if there is a falling out or dispute between you and your successor.

To stay on top of this, it may be useful to diarise periodic dates to check your Succession Plan and ensure that its contents reflect your business and its interests at that moment in time.

 

CONCLUSION

A well-drafted Succession Plan will make the process of handing over your business to your successor as easy as grabbing a coffee. Having a clear and articulated plan means fewer distractions and little room for disputes when the handover is happening. It takes away a lot of the stress and uncertainty that usually accompanies business owners when they are leaving their business.

Our team here at GLG Legal understands the importance of leaving your business in capable hands. We have assisted businesses in drafting their Succession Plans to ensure that they are fit for the business owner’s personal and business interests. If you are a business owner in need of a Succession Plan, or if you would like further information, contact our office at (07) 3161 9555 today.

WHY CHOOSE GLG LEGAL

We believe that every business is unique, and so are the needs and aspirations of the owners. That’s why we work closely with you to tailor a Succession Plan that precisely fits your circumstances and objectives. Whether you’re planning for retirement, selling your business, or passing it on to the next generation, our team is here to ensure your wishes are met.

Our team recognises the profound importance of leaving your business in capable hands. With years of experience in this field of law, we’ve assisted numerous businesses in creating tailored Succession Plans that align with both the owner’s personal and business interests. We’ll collaborate with you to navigate complex decisions and craft a plan that secures the future of your business.

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