Top tips for passing on the family business
It is no secret that starting up and running your own business is hard work and at times very stressful, but the same can often also be said of saying goodbye to the business, whether in the event of a sale or in passing it down to the next generation in lifetime or on death.
Family businesses are at the very core of the British economy and there are more family businesses in the South East of England than in any other region of Britain. The Surrey hills is no exception.
In a recent survey we conducted across 350 family and privately owned businesses the most serious concern for all of them was the longer term future of their business. Their concern was so great that a very high proportion of respondents said that they would consider selling their business rather than passing it on.
The key to any successful ‘exit’ from a business is planning. The death or divorce of a family business owner can cause a sudden exit event which can take the business and those working in it by surprise. Other exit events such as the sale of the business or transitioning to the next generation may mean there is a little more warning and therefore potentially more control of the time scale but in each case planning, and planning early, is always the best approach.
The difficulty facing most entrepreneurial business owners is that, certainly in the early years, all their energies are rightly focussed on making the business successful. Thoughts of future succession or sale are not usually high on the agenda. In addition often these businesses grow in an almost ad hoc fashion, opportunities are grasped with no particular thought given to the most appropriate legal structure for ownership, borrowing or growth.
So where and when should you start? No business can stand still and one that is powered by private ownership and capital needs a robust and constantly reviewed strategy.
Whether you are just setting out or have an established business it is important to identify the right control and structures to ensure the future success and longevity of your business. Incentivising and engaging future generations and being clear about any shared aims and ambitions can mitigate a raft of problems further down the line.
Taking the time to have a legal ‘healthcheck’ of your business can be a good place to begin. For example, making sure that your company articles and shareholders agreement are up to date and in good order or that your partnership agreement has been properly drafted can be the first step. Ask yourself – do you have the right structures in place to give control of the business to the right people at the right time?
With a family business it is easy to forget that not all of the family members may be part of the business or share the vision of the founding owner. Business owners often struggle to keep on top of their asset structures particularly through todays more extended and blended families and again, often problems are only discovered at a time of crisis – the death, divorce or incapacity of a family member. Ask yourself – what are your family contingency plans, is your business ‘match fit’ for marriage, divorce, illness or death?
Do you have up to date wills and powers of attorney in place which adequately deal with your business and personal affairs?
At Charles Russell Speechlys, we appreciate that with successful businesses no two scenarios are ever the same. We are able to provide a fully integrated approach to provide support to business owners through the inevitable periods of transition. By pre-empting and planning for these potential challenges hopefully business owners can avoid any nasty surprises and maximise the opportunities for a successful exit.
If you would like a copy of our Family Business Guide please contact Sally Ashford on Sally.Ashford@crsblaw.com or 01483 252508
For more information | www.charlesrussellspeechlys.com
This article originally appeared in Surrey Life: www.surreylife.co.uk