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What will happen when you retire? How do you see your business continuing? How do you plan for it; what are the dos and don’ts?

Handshake and agreement

Succession and exit planning is a general term which encompasses any transfer of ownership and/or control of your business to new management or ownership. There are a number of ways of achieving this, each of which depends on who owns the business and your current business structure, be it sole trader, partnership or a limited company. Ways of transferring ownership can be complex and can include disposing of the business, or shares in the business, through a sale, management buyout, management buy-in or realising your investment through a voluntary liquidation. Transfers to family members is also an option if the intent is to keep your wealth in the family. The viability of each route depends on personal circumstances and personal choice. A usual driver is tax efficiency.

Few business owners consider how to put in place succession and exit planning, even though the general consensus of business owners agree that in some form, succession and exit planning is important.  Many businesses however still don’t actually have any form of succession and exit plan in place. Our advice is put something in writing!

Transferring ownership can be an emotional and complicated process and this is why it is often ignored until it becomes an issue. The best advice is that even if you think you have years to go before you will have to consider exit and succession planning, it is best to start thinking about it now. If you are considering a sale ask yourself a few crux questions: who is my market? Who will buy my business? How can I make my business stand out Do I have my house in order when people start asking questions about my business When do I want the exit to happen? What will my future role be and will I make a
clean break? All of these questions can be answered with a bit of research and professional help.

Of all the types of business that need succession and exit planning, it is typically family businesses that leave the process until it’s too late. Day to day management gets in the way! But, an effective succession and exit plan can form part of your overall business development strategy and review all available routes for your exit.

For example, basic exit considerations can be assessed. If you were considering a sale,  and had a value in mind, have you planned an exit strategy well in advance of the anticipated sale date? By doing so this will optimize the sale price and by not doing so you could significantly depress the sale price.

As well as investigating and discussing the ‘nuts and bolts’ of succession, it is best to take professional advice regarding the tax and the legal implications of each of your exit options. For most owner managers of any business, making a significant capital gain from a sale of that business is a part of their financial security/planning.

Issues to consider will include the amount of capital gains tax payable. Entrepreneurs’ relief may be available to individuals (and in certain cases, trustees) who, by the sale of their company or business, realise qualifying gains. Inheritance tax implications will also need to be considered, and certain business and corporate structures may not benefit
from the various reliefs available. Planning and restructuring your business in certain
ways now, can assist your estate avoiding the worst of this tax at a later date.

If you wish to ensure that your family’s business wealth remains within the family, or you wish to exit and maximise your gain, you will want to ensure that in each case the fruits of your labour are maximized and protected. We can assist you on this journey.

Please contact Simon Morris, partner in our corporate team for further information and advice regarding succession planning on 01392 210700 or email