How many of your clients own their own business? Do they have succession planning in place?
Approximately 4.7million business in the UK are family owned, and 100,000 family SME’s will undergo a family transfer of ownership between generations every year (Institute for Family Business). This figure alone immediately points to the need to ensure business succession planning is in plan for a successful transfer within a family.
But how many of your clients have their own business and have yet to fully get their succession planning in place? The cost to them and their family could be huge, but you have the opportunity to help them get everything in place for future security.
Families in business often feel a responsibility to pass on a credible and successful business to family members, but the ways and how’s of doing this can be overlooked or misinterpreted and may fall short of ensuring full protection for the future.
As a key contributor to the UK’s economy (they generate over a quarter of the UK’s GDP), family businesses are integral to supporting future growth and employment in the UK.
Inevitably, at some stage a business owner will decide (through a number of reasons) to retire from their business, and having a succession (or exit) plan in place will help for a smooth transition, which will be beneficial for those involved as well as for the business and its customers.
70% of family business (PWC Family Business Survey 2017) already have family members as part of the business, and yet only 13% of these business have succession planning in place.
The gap is visible and the need is vital for business succession planning.
What is business succession planning?
Succession planning can start at any time, but the earlier the better. Unknown and unexpected events can occur at any point and a robust plan can eliminate turmoil and disagreements at such times.
Without a plan then a business can be at risk. Legal obligations, the value of a business and the smooth running of the business will all be affected factors.
Having a succession plan in place will ensure that the business is transferred to the chosen representatives, it will outline all legal elements and can also ensure any tax implications are planned for.
A Will may be the first step…
By making a Will, and keeping it up to date, then a client can clearly outline their intentions for their business and who it may pass to.
A Will can outline what will happen to a business and its assets. Clear instructions can be given on business ownership, type of succession and transfer of assets, helping ensure the business, or part of it, stays within the family for future generations.
A Will should take into consideration other aspects, for example, if a partnership is in place with ownership of a property then there may be a ‘joint tenancy’ as part of the partnership which will ensure the property is transferred to the partner irrespective of other elements of the Will.
As in any circumstance, if no Will is in place then assets may pass according to the rules of intestacy, and the business may not be transferred as desired, leaving it open to disruption and possible loss of value.
Business Relief may also be of relevance as it will enable your client to pass on some of the business possibly tax free by making a Will. Business Property Relief will form part of another article in this series.
There are numerous opportunities available for financial advisers who wish to support their clients in this matter, not only by providing a much needed service to such clients, but also cementing your future relationship with them and their family for the future.
BTWC can help support you and your clients in getting the right succession planning in place, ensuring all those years of hard work and commitment are passed on accordingly whilst taking into consideration other aspects such as inheritance tax.
Look out for our next article within this series, focusing on ‘Business Lasting Powers of Attorney’.
Call BTWC on 01522 500823 or email firstname.lastname@example.org regarding any business succession queries, our team can help!