If you are looking to transition to retirement or exit your business in the next few years, you need to start planning now.
There are many options for business succession, but ultimately a smooth business exit that achieves maximum value for your business and enhances your personal prosperity, requires professional guidance and the benefit of experience. We can help.
Business succession planning is complex. There is a lot to consider and questions you won’t know you need to ask. In our experience, business owners looking to transition to the next generation, sell or retire, first need to understand the options and what’s involved for making the most of the financial outcomes to enhance personal prosperity.
Here are your options…
1. Sell your business to a third party: To achieve optimal financial outcomes when selling your business, it’s important to have comprehensive business accounts. These will demonstrate the financial health of your business over a number of years and they’ll enable prospective buyers to undertake due diligence. There are other factors which can enhance your business value too. These may include lucrative long-term contracts with customers and/or suppliers and operational efficiencies you’ve achieved through specialised equipment, solid systems and processes.
It can take years to get your business sale-ready, manage personal wealth extraction, find a buyer and complete a successful sale. Even if you don’t want to sell your business in the immediate future, having a sale-ready business can put you in a position of strength, and ready to capitalise on potential (often unexpected) sale opportunities.
2. Transitioning to a family member or business partner: Transitioning business ownership to a family member involves comprehensive planning to consider the often-complex taxation and legal requirements and implications for all parties involved. The outcomes to be considered include the transfer of management responsibility, your own retirement plans and necessary funding, the most appropriate business structure for transitioning the business, as well as remuneration for family or your business partner during the transition.
3. Key employee shareholder plans: Transitioning the ownership of your business to a key employee can be a great strategy for retaining key staff, key skillsets and key customers, however valuing the business and shareholding will usually require a great deal of negotiation and time. Creating funding options for the incoming shareholder using profits, personal savings and/or business loans can be complex and will take time, so planning early is important if this is your preferred option.
4. Ceasing operations and selling business assets: It’s possible to sell business assets to release equity as part of your planned exit from the business. Asset sales will have varied tax implications, depending on where assets are held and/or if assets are jointly owned. There are also strict rules associated with Capital Gains Tax (CGT) caps and concessions associated with business owners transferring wealth into super, so it’s important to consider how funds from asset sales will fit with your overall superannuation strategy and financial and retirement goals.
5. Other alternatives: There are also other alternatives which may be considered including establishing strategic alliances or merging with strategic partners, which can also address succession issues.
Each option has advantages and disadvantages and financial and tax implications to be considered as part of your personal and business circumstances and long-term financial goals.
Why you'll need professional advice
Tax minimisation
Our tax expertise means we can help you take advantage of stamp duty exemptions and maximise CGT discount and small business CGT concessions as part of your transition out of the business, as well as advice on tax implications and long-term effects associated with different business structures.
Asset protection
It’s important to protect your personal interests, ensure your assets are protected and your personal liability is minimised as part of your transition out of the business. We can identify areas of concern such as personal guarantees for business loans or other risks such as breaches of director duties during transition of business ownership.
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For guidance or further advice about succession planning or if you are interested in a second opinion for achieving improved business outcomes, I encourage you to give us a call on 03 9708 8801 or email info@rvpartners.com.au
At Robinson Voss Partners, we have over 40 years combined experience and expertise in accounting, business advice and specialised tax issues.
General Advice Disclaimer: The information contained within this document is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Robinson Voss Partners (RV Partners) strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances.
