Every family owned business needs a plan for the future.
Why might you put your business in a trust?
Since 2017 it has been possible for family businesses to be owned by a trust. Not only is this now possible, but it is often a good idea.
When you put the shareholding of your business in a trust, then the business is owned by your family as a whole rather than just one or two individuals. This;
- does not in any way affect your control over the business or your ability to manage the business on a day to day basis,
- gives you more flexibility with the distribution of the business profit among family members,
- means that the business is not put at risk in the case of the death, disability or insolvency of any of the current owners, and
- means that the family may be able to benefit from some tax advantages.
One (but not the only) reason for owning the family business through a trust is that it provides an excellent platform for developing a family business succession plan.
For family business, having a plan for the time that the founder is no longer able to manage the business is not just essential, it is also standard practice in many other countries.
For more information on succession planning, see the Q&A below:
What is a succession plan?
A succession plan is the identification of the most effective method for transfer of management, control, ownership, knowledge and skills of your business when you no longer want to, or are no longer able to run it yourself. It also protects your business from external attack.
The transfer can be to your children or to a non-family member, and should be structured based on your circumstances and goals.
It is also important to understand that it is possible to pass ownership of your business on to your children without also giving them control.
What are the benefits?
All family businesses benefit from a properly drafted and implemented succession plan. Without proper planning, you and your family may be faced with unexpected emotional and financial stress. The final result may not be what you want, and the transition process will be complex and probably very expensive. Most important, with a good plan your business will continue and will stay intact.
A secondary benefit a good plan is that it can strengthen your business structures and protect them from attack from external sources.
Will I lose control?
A successful succession plan is always structured so that you retain complete and absolute control over your business for as long as you want.
What will I need to do?
Step One: Define your goals
First, decide what you would like to happen to your business when you are no longer around to run it. Consider what should happen if you unexpectedly die. It may also be that you are interested in retiring or partial retirement at some time in the future.
If appropriate, discuss your plan with your family members.
Step Two: Speak to us
Once you have decided what you want, it is time to discuss your options with us. We will need some information about your business and a clear idea of your plans. We will use these to help you weigh your various options and structure your plan in the best way to minimize costs and tax.
Your first meeting with us is free of charge.
Step Three: Create the plan
Once we have presented you with the various options, you will need to decide which option is best. We will then create a succession plan to facilitate the future transfer.
This plan may include preparing documentation to reorganize the financial or corporate structure of the business including incorporating companies, settling trusts and transferring real property.
Step Four: Implement the plan
Finally, we will assist you in implementing the succession plan.
When should I start?
Ideally you should start planning for the succession of your business as soon as possible to ensure that any future transfer of your business can be structured so that it best benefits you and your family.
Generally speaking, the more time you allow to implement your plan, and allow the new structures to settle, the better.
To get started, just contact us. Our initial consultation and exploratory meeting is always free of charge.