Do you have a plan for the transfer of your business?
Transferring a business can be an involved and complicated process that can have a major impact on your finances and retirement. Succession planning involves transferring ownership and control of a business to new ownership. This process can be highly emotional and complex, which is why often it is ignored until it becomes a pressing issue, for example, when the owner (or one of the principal owners) becomes ill or too old to carry on running the business.
Some of the options to transfer a business are: transferring ownership to a family member, transferring ownership to a non-family member or disposing of the business through a sale, management buy-out, management buy-in or voluntary liquidation.
Evaluate different options
You could decide to transfer the ownership of the business to a family or non-family member. You might contemplate to sell the business or dispose of it through a management buy-out or management buy-in. Finally, you might decide that the best course of action is to wind up the business altogether by means of voluntary dissolution.
One of the first steps to take would be to consider whether there is an obvious choice of a successor within the business. This could be a family or non-family member who has worked for you for some time, someone who knows the business well and who has the necessary skills and abilities to operate the business.
Identifying the right person to take over the running of your business can be a difficult decision. Much is at stake, and you need to be absolutely certain your chosen candidate is capable of carrying your business forward.
If an internal succession is not possible, you might have to opt for external options. However, if you need to generate funds (for example) for your retirement, a sale of your business might be your only course of action. Should you decide to opt for the sale of your business, I would invite you to read Ian McLeod’s earlier blog about the sale of a business.
Develop a succession plan
Having to develop and formalize your succession plan enables you to know exactly what course of action you plan to take and also setting out more effective strategies that need to be employed to attain your objectives.
Once you have decided which course of action best enables you to transfer the control of your business in the manner you want, you should be able to work out a timetable of necessary steps.
Your succession plan needs to be communicated effectively to other relevant stakeholders within your business. Letting staff, partners, customers and suppliers know of your intention to cease involvement in the business is essential and timing is crucial. The last thing you need is people to lose faith in the business when they hear you will no longer be involved. Finally, it is important to seek expert advice on the value of your business and on every aspect of the transfer of the ownership of your business (not least of which is taxation).
As you can see, there are certainly a number of issues to consider in planning the transfer of your business. A few have been discussed here, but rest assured there are indeed many more factors to consider. Ultimately, it is vital that you seek out appropriate legal and tax advice in establishing your plan.
Should you have any further questions about the transition of business ownership, I would be glad to provide you with additional information.