Handing over your business to family
Family business: Keeping your business in the family when you decide it’s time to retire is a common choice for many owners.
When planning to hand your business over to your children or any other family member, there are precautions you should take to ensure that the business model is protected in a way that you wish. Family members who have shown an interest within the business need to undergo the proper training and education for the position. This process may take years and not be considered a few weeks before the business owners retire.
Choose the right successor for your family business:
When changing ownership of any business to a family member, think about who will be the best fit for the business. While it may be an appealing option to set up your children financially, ensure that they have the necessary skills and commitment to effectively take over the business. One strategy to help choose an appropriate successor is by having meetings to discuss various aspects of the changeover. Planning out what will be discussed in each meeting when you decide you are going to change ownership will help to create a seamless transition.
Have a succession plan:
Having a well-defined plan in place will be of assistance when changing ownership of the business. A succession or exit plan will outline who will take on the business once you leave, and the manner in which the transition will take place. A formal succession plan can help to guide your business through a smooth transfer of ownership. This will allow you to teach your successor the ways of the business and the correct process of doing various tasks. This also helps to teach and maintain the order in which the business has always operated, making the change easier for customers and clients. After the transition has taken place, your successor can then choose to make any changes to the business model that they think could improve the business. They can now do this with an appreciation and understanding of how and why things have been done a certain way in the past.
Manage legal requirements:
A major part of the succession plan involves managing the financial and legal issues that arise with the changeover of a business. A common mistake many business owners make when handing the business over is thinking they are still in charge, which is not the case. Before handing over the business, you will need to do a number of things including cancelling tax registrations such as GST, lodge any final tax returns, pay any outstanding activity statements or bills, and transfer any other assets such as domain names or web registrations.
Define your role going forward:
By overstepping the boundaries and trying to be over-involved after you no longer own the business, you can cause conflict between yourself and your successor which will impact negatively on the business. You need to respect the new person you have appointed as an owner and let them run the business on their own. There is the option for you to be a silent partner or advisor, so you can be there as a soundboard and offer advice should they need it, but anything more can become overbearing. Make sure you prepare yourself for what no longer owning the business will mean such as how you are going to fill your time that was previously spent working.