At Gary Weigh & Associates, we are business planning Australia! That includes the all important and often forgotten issue of succession. The answer to succession is not simple but the more you plan the simpler it will be.
If you own your business personally as a sole trader, it can be left to a beneficiary of your choice in your Will. If you are a partner in a partnership with no partnership agreement, the partnership is automatically dissolved and your share can also be passed to your Estate via your Will.
If your business trades as a company, you are not the owner of the business assets and liabilities; your company is. So you can’t leave the business directly to a beneficiary via your Will. However, as owner of the company, your shares in the company are personally owned and can therefore the company (and everything in it) can be left to a beneficiary of your choice in your Will.
Your ownership interest in a fixed trust can also be passed to your Estate via your Will, in much the same way as a company, but the succession of a discretionary trust can’t. It must be dealt with in the trust deed.
So the succession of most simple business structures looks very straight forward, doesn’t it? However, it is not straight forward and here’s why!
The problem lies not so much in the passing of your business but in the receiving! The critical issue is who will receive ownership via your Will when you die. Not everyone is a willing or competent beneficiary.
Despite what they might have said to your face, spouse, friends and family may not want to follow in your footsteps, or may be incapable. It is for this reason that a business often dies with its owner.
I will let you in on a secret to an alternative and much smarter business succession strategy. This will be coming up over the next 2 installments of business planning Australia.
For more on business planning Australia read A challenge is looming for financial advisers
Until next time!