Most businesses in Ireland are SME’s and many are family-owned. At some stage the founder or current owners will need to consider succession planning and retirement, whether it’s passed on to another generation or sold outside the ‘family’.
Why is a succession plan so important?
Life happens—and unless you have a plan to deal with the unexpected, the business you worked so hard to build could crumble if you become disabled, die, get divorced, or decide to split with your business partner.
A good succession plan can help:
- Prepare the business to handle unexpected events
- Transfer ownership when the time comes
- Maintain your lifestyle in retirement
- Provide for your heirs financially
- Reduce the tax implications for you and your family
Think of a succession plan as peace of mind for the business you’ve worked so hard to build.
A good plan will need input from your accountant and a tax consultant. You might also want to involve experts in company structures and corporate finance, particularly if you need to value the business.
At DHKN we have all these specialists under one roof in our Galway office. Expertise on tap to help you plan for you and your business’s future.
Below are six things to consider.
1. What are your personal goals?
Having your personal goals clear in your mind, and ideally on paper, will help ensure they align with business goals, making it easier to achieve what you want for you and your family.
2. How will you exit the business?
You won’t always know the answer to this because circumstances may change between when you start to plan and the event itself. Your exit could be temporary, partial or complete depending on your personal and financial circumstances.
Does any or all of your family have any interest in running the business or should you consider selling outside the family possibly to a business partner, key employee or a third party?
3. Value the business
Even if you aren’t planning to sell your business, conducting a business valuation has many benefits. It helps you develop a retirement income strategy, properly value future owners’ shares, and purchase adequate insurance for protection planning.
4. Tax planning
There are several tax considerations which will inform your approach to succession planning. Irish tax policy is generally supportive of businesses transferring between generations, and there are tax reliefs designed to minimise tax payable on such transfers.
If you’re considering a sale outside the family, there are actions you can take now to reduce the potential tax burden on you and your family when you do exit.
Seek professional advice.
5. Prepare for the transition
Prepare both your successor and your business for a smooth hand-off. No matter who takes over the business you will want to keep it going – and growing. The transition period to new ownership is a vulnerable time for a business.
6. Review your plan regularly
Reviewing your succession plan annually with your team of advisors will help ensure a successful and seamless transition — no matter when or under what circumstances it happens.
You can see more about Succession Planning in our free publication here.
For an informal discussion with our experts about how we can help your business match your ambition, contact me at firstname.lastname@example.org or your regular DHKN contact.