Passing Your Family Business Down To A New Generation
It is fairly well established that many small businesses in Australia are family-owned. However, some people may still be surprised that the percentage of family-owned businesses may be as high as 70%.
As Australia’s ageing population continues to grow, there will be an increased number of business owners who will be looking to retire from their business and working life. For some of them, it is their desire to see their business move on to the next generation of their family, rather than be sold to an external party or discontinued altogether.
Making a Plan
Passing on a business is not as simple as just stepping back and letting the next generation take the reins. It requires strict and comprehensive planning, as well as a number of potentially tedious administration tasks to facilitate the official transfer of the business.
Creating a succession plan for a business is imperative for ensuring that it continues to operate as normal both during and after the changing of the guard. A business that is affected, even temporarily, by the passing of ownership strongly risks losing clients and alienating stakeholders, which makes a succession plan that much more important.
One key point that should be covered in a succession plan is who will own, control, and manage the business. This could be one family member or a mixture of family and non-family members (a larger business, for instance, may grant control to a family member while also creating a board of family and non-family members).
However, a solid succession plan also needs to cover the transfer of the business’s assets, which may be by way of a formal sale, a gift, or through the creation of a trust.
The Admin Duties
Business owners who are retiring also have various obligations they need to address before leaving work life for good. These are largely tax-related, and especially affect those operating as a sole trader.
A retiring sole trader will need to cancel their ABN and GST registration after they have met all of their obligations in that area, and will also need to pay any amounts owing on their instalment and activity statements.
They will also need to formally transfer their business name and assets (don’t forget the ones that are hard to spot, such as a business website), as well as all business records that may have been under their name.
Business owners who are considering passing their business onto a family member can call Hart Partners. The highly experienced, yet friendly team at Hart Partners will be able to advise you on succession planning and making sure your business stays strong after the next generation takes over.