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Succession Planning Guide for Australian Family Businesses

Jonathan Rudman
Published by:
Jonathan Rudman
Published on:
April 27, 2021
Modoras Accounting (SYD) Pty Ltd ABN 18 622 475 521
Success Planning for AU Family Businesses

Family-business succession guide

Family-business succession is a journey, not an event. To be successful, it requires a regular investment of time over the course of three to five years.

This is the view of a new publication — An introductory guide to family business succession planning — aimed at family-business owners approaching retirement age.

The guide helps them understand the process of passing on their business to the next generation of family members; and what they need to think about to maximise their chance of success.

The three- to five-year timeframe to complete the succession-planning process is reflective of its potential complexity, the guide says.

Each family member brings their own skills and experience, perspectives, challenges, and emotions to the discussion; and relationship dynamics between family members vary.

A collaboration between Family Business Australia (FBA) and the Australian Small Business and Family Enterprise Ombudsman (ASBFEO), the guide covers:

  • management succession: the transfer of leadership and day-to-day management of the business
  • ownership succession: the transfer of equity interest in the business entity. (Owners do not necessarily have a say in management decisions.)

One of the first questions the guide asks is whether there’s potential for your business to stay in the family and be passed on to future generations. It includes a decision flowchart to help you answer this question.

If your business is suitable to be passed on, it’s time to start planning.

Planning for successionj

While the guide stresses there’s no one-size-fits-all succession planning formula, there are key questions it says you must answer, namely:

When? It’s recommended you allow three to five years to plan for and implement family-business succession (though experienced advisors can help you fast-track the process). The guide includes a ‘Readiness assessment tool’ to help your family determine whether it’s ready to start the journey.

Who? Succession planning can involve individuals who are family members, owners and/or involved in day-to-day operations; non-family employees with or without an ownership interest; and investors. You may also decide to involve external advisors in the process.

How? Options include a gradual transfer of ownership by gifting or sale, or a complete one-off transfer; a total withdrawal from management by the current owners; or a progressive and staged devolution of power.

The guide includes a ‘Succession planning checklist’ to help you, your family and any non-family members work through the key steps.

The existing legal structure of the family business you’re transitioning may have different legal, accounting and taxation implications.

The guide, therefore, recommends you seek early advice from specialists in these areas.

Financial and business advisers like Modoras can help you with:

  • process facilitation – to guide and coach the family through the discussions and planning
  • law and accounting – to write shareholder agreements, undertake estate and tax planning, business structuring, governance, valuation, and ownership transfer completion
  • business finance — to understand the nuances of your family and business finances
  • business advice — to provide guidance on communication, family and business structures, governance, business strategy, roles, remuneration, and change management.

Other ways to transition or exit your business

If your children, for example, do not want to eventually take over your business, the guide explains other ways of transitioning or exiting it, namely:

  • selling your business
  • transferring your business to employees
  • merging your business with another
  • winding up your business
  • liquidating your (insolvent) business.

If you’d like help with the accounting and taxation elements of a family-business succession plan, call us on 1300 888 803.

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IMPORTANT INFORMATION: This blog has been prepared by Modoras Accounting (SYD) Pty Ltd ABN 18 622 475 521. The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals’ personal circumstances have been taken into consideration for the preparation of this material. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Accounting (SYD) Pty. Ltd. recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this blog can change without notice. Modoras Accounting (SYD) Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Accounting (SYD) Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Accounting (SYD) Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication. Liability limited by a scheme approved under Professional Standards Legislation.

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