Business Succession Planning
Business succession planning is vital for your business, regardless of the age of its principals.
At Ballantyne Law Group, you will find the personal attention and the clarity you’re needing.
Our Gold Coast lawyers will help you get beyond the complexities and the legalese so you can make informed decisions for your business succession plan.
Why Business Succession Planning?
Business succession deserves serious consideration yet, for many of Australia’s small to medium enterprises, this important phase of business planning remains unaddressed until it can no longer be ignored.
Your business successes came as a result of sacrifices, risk-taking, and much hard work. Congratulations are also in order now you’re thinking about your business succession.
But this is no time for complacency. Passing the baton deserves careful attention.
Whether you are thinking of selling your business or introducing a new executive team, you will want to hear information that is relevant to your circumstances.
You can count on Ballantyne Law Group’s Gold Coast legal team for straightforward advice and comprehensive explanations of the consequences of the various options.
What Makes a Good Business Succession Plan?
A good business succession plan will address a range of issues, including:
- Business structuring
- Management systems & processes
- Departure events
- Key personnel
- Risk management
A range of people and advisors can be involved in a proper succession plan, including:
- Principals of the business
- Legal advisors
- Accounting & financial planning advisors
- Insurance brokers
Business Succession Problems
Your business succession plan needs to account for a range of exits, including the departure of one (or more) of its principals, and also the sale of the business.
For some business owners, the succession plan is simply to pass the business on to the family member next in line.
Problems with this can include inadequate consideration of sibling entitlements. For example, when a business is left to a family member, are their siblings receiving their fair entitlements?
It’s also not unusual for business owners to assume that when they’re ready to retire, the business will simply be sold.
This thinking often goes wrong because in many circumstances, there is no saleable asset — the business may have no value without the principal’s involvement.
At other times, no buyer emerges because there are too few potential buyers in the market or the asking price for the business is unattractive to potential buyers.
There are instances that are untimely at any time — a relationship breakdown, illness and incapacity, death.
As with any other aspect of business, succession will be easier and less traumatic with proper planning and preparation.
A buy/sell agreement will often be at the core of a business succession plan, particularly where multiple owners/principals are involved.
This buy/sell agreement is a contract between business owners/principals and it deals with the transfer of the business when a ‘departure event’ occurs.
These departure events are most commonly involuntary events, such as a principal’s death, illness or injury. The buy/sell agreement should also include ‘voluntary’ events, such as divorce or retirement.
When a departure event defined in the buy/sell agreement occurs, the continuing principals will be obliged to purchase the departing principal’s interest.
A mechanism to value the business and therefore a principal’s interest, are often included in buy/sell agreements and continuing principals are often able to fund the asset transfer through insurance.
Federal legislation in Australia has recently clarified some of the more complex issues regarding the ownership of policies under a buy/sell agreement. If this applies to your succession plan, it may serve you well to review this subject.
The structure of the buy/sell agreement also needs careful attention because a transfer can have significant capital gains tax and duty implications.
How To Make Your Succession Plan
A proper business succession plan, as with proper estate planning, takes care of the transfer of an asset when its owner is unable to continue managing it.
Ballantyne Law Group’s Gold Coast lawyers specialise in business succession planning.
We will work closely with your accounting, financial and insurance advisors, to provide you with an appropriate business plan for transition to new leadership/ownership.
This includes the preparation and execution of buy/sell agreements.
Please call (07) 5606 7332 to discuss business succession planning or any other matter.
James Ballantyne is the Principal of the Ballantyne Law Gold Coast. He has developed a strong practice in commercial law over the past decade.
Since his admission as a Solicitor in 2002, James has worked in key roles at some of Queensland’s leading Commercial and Business law firms.
Based on the Gold Coast for the past decade, James has also been admitted to the Supreme Court of Queensland and the High Court of Australia.
James is able to provide practical, pragmatic and effective legal advice in plain English. He’s here to assist you with legal matters no matter how complex they are.
Email or call 07 5606 7332.
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