Despite your best intentions, your business could die with you. The asset you worked all your life to build for yourself and your family; your jewel in the family crown and your ultimate retirement asset, could be dashed against the rocks when you die.
Business succession is not a matter of whispering your deathbed instructions to your first born eldest child. If you believe that, you watch too many Godfather movies.
Here is a brief outline of reality for the future of your business if you die whilst still the owner or a part owner.
- Firstly, the beneficiary who inherits your business could be lacking any relevant knowledge and experience and could be the worst thing that ever happened to your business besides losing you.
- Secondly, the beneficiary you choose in your Will might be happy doing other things and not the least bit interested in your business (despite what they say to your face).
- Thirdly, any co-owners who survive you in the business are not going to be too pleased about suddenly being in business with a perfect stranger. It was never their expectation that you would be replaced involuntarily by your spouse, friend or family member, who could turn out to be disinterested, lazy and / or inept (and yet still draw an income).
- Lastly, and depending on the timing of your demise, the beneficiary you choose may inherit more debts than assets from you. Your bank won’t care if you’re dead; they will still want their loans repaid; and upon your death, they will very likely want them repaid in full immediately.
Having no succession plan even for a simple business structure, is just plain dumb!
It is a much smarter decision to pre-arrange the passing on of your business and the repayment of any outstanding business debts in advance, while you are alive and well.
That way, your business goes to a good home at the right price without being a burden on spouse, friends or family. Your family is looked after because they receive fair value upon your death from a pre-arranged sale.
For more reading about business planning Australia, read The First Rule of planning
Until next time!
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