Owning your own business can be very satisfying (as well as a lot of hard work) but none of us work forever; and it is important to plan for the future of the company that you have done so much to build.
The sad fact is that not enough owner-managers are thinking about succession and planning seriously for it. A recent study showed that only 24% were either definitely or very likely to have a review of their succession plan, and that figure has dropped from 29% last year.
We may be living in what the ancient Chinese curse called ‘interesting times’, but that is no reason not to think about, and make plans for, the future.
Get Appropriate Help
You will not get far in your planning if you do not engage, at the outset, a specialist small business tax advisor company such as Odiri Tax Consultants.
Tax Planning
Tax is at the heart of any sensible succession plan – and while it should not rule your every business move, it will always be an important consideration. You may, for example, be able to claim Entrepreneurs’ Relief if your operation carries out genuine R&D and is generating new solutions to industry problems. And are you claiming correctly for your capital expenditure?
Company Structure
It may be that your structure is less than ideal. Sole traders should consider limited liability incorporation; while partnerships may be better if they also adopt limited liability. The rights of fellow directors or partners are also key considerations.
We will also advise you on any subsidiary, sister, or dormant companies that you may have – as far as purchasers are concerned, the simpler the structure the better; so that they can see and more confidently value what they are getting.
Personal Tax
Your own tax impact must be analysed – whether you are making an outright sale to another firm, staying on for a defined period (employee? consultant?), or handing it over to the next generation of your family. How will you invest your funds to give you a secure (and not too taxing) future?
Sale Value
It is essential to have an independent valuation carried out of your business, because HMRC may take a different view and you do not want any unwanted capital gains tax surprises. You also need to be prepared for haggling with your purchaser/successor. This applies whether you are planning a trade sale to another firm or to members of staff: or a family handover. We can help you through this process.
Housekeeping/Healthcheck
We all have unfinished business, and no business is perfectly organised. However, when you are planning for succession, it is important to clear up any altercations with staff, suppliers, or customers – because due diligence will be carried out and any adverse issues will count against the purchasers’ valuation. (HMRC counts as probably your most important supplier, followed by your landlord).
Aim to make all returns on time, pay the bills and exit any poorly paying customers. If you are weak in any area of your team, consider replacing any problem people and hiring new talent.
If, having read this brief rundown on succession planning, you want to put your business’s house in order then we will be happy to have a no-obligation initial discussion with you.
