If you’ve spent 20 or 30 years building a successful business, deciding what happens when you eventually step away can come with a surprising number of questions.

Who will take over? Will your children want the business? Could a business partner or senior employee step up? Should you sell? And if you do sell, how do you protect the value you’ve spent decades creating – and how important is that legacy to you?

Succession planning is about answering these questions so that when the time comes for you to leave, you know you’ve made the best decisions for a business that you’ve nurtured and grown for many years.

Succession planning is about much more than retirement

For many business owners, the business represents much more than the revenue it generates. It may have become one of your largest assets, and it employs people you’ve worked alongside for years and care about. It supports you, your family members, and it carries a reputation you’ve spent a lifetime building.

This can make succession not just an important financial decision, but a deeply personal one too.

When is the right time to begin succession planning?

The sooner you start, the better – ideally several years before you’re planning to retire or step away.

This gives you time to strengthen the business, develop potential successors, address structural issues and reduce the business’s dependence on you personally.

It also allows time to consider questions such as:

• What is the business actually worth?
• Is the business structured appropriately for an eventual transition?
• Are there family members, partners or employees who could take over?
• Would an external sale deliver the outcome you want?
• What will happen to employees and customers?
• How much money will you need after leaving the business?
• What are the potential tax consequences?

By beginning succession planning years before you plan to hand over, you’ll have more control over the eventual outcome of the business and the impact the transition may have on the people you care about.

There isn’t one right pathway to succession. It’s different for every business owner and, ultimately, it’s your choice.

What are your succession options?

Family: A family succession may be the natural choice for some businesses, but transferring ownership to the next generation requires careful planning. Family members may have different levels of involvement, capability or interest, and questions around ownership and fairness can quickly become complicated.

Business Partner or Employee: Another option may be transferring or selling your interest to an existing business partner, senior employee or management team.

External Sale: For other owners, an external sale will make more sense. There are buyers interested in acquiring established owner-operated businesses with the intention of continuing what the founder has built. Some buyers may also offer flexible transitions, allowing the owner to remain involved for an agreed period rather than walking away immediately.

The best pathway will depend on your family, your business, your financial position and your longer-term goals.

Possible tax implications

Succession can involve significant changes to business structures, ownership, assets and trusts, so tax needs to be considered well before transactions take place.

The ATO has specifically identified succession planning as an area of their attention within privately owned groups. Some of the issues the ATO has observed include assets moving within groups, Division 7A loans being settled, family interests being restructured and trust deeds being amended. Capital Gains Tax, asset valuations and tax consolidation can also become relevant.

This doesn’t mean succession planning itself is a problem. The ATO acknowledges that succession decisions are often driven by genuine considerations such as protecting family wealth and preserving a legacy. However, the tax consequences need to be understood and appropriately managed and this is where Colledges’ 50+ years of tax accounting, and succession planning experience will help you make the right decisions so that your business has met its tax obligations and you can leave with peace of mind.

Work with Colledges to help you prepare

Good succession planning brings together your business, tax position, personal wealth and plans for the future.

At Colledges Accountants + Advisors, we’ll help you begin the planning process well before you’re ready to exit to understand what you want to achieve and help prepare your business for that transition.

That can include reviewing your business and ownership structures, identifying potential tax implications, helping establish a realistic picture of business value, considering the financial impact of different succession pathways and working alongside your other professional advisers where required.

We’ve helped many of our clients develop succession plans towards the outcomes that matter to them. Good succession planning gives you time to make well-informed, considered decisions that respect the many years you have spent building your business.

Giving the same care to how you eventually leave your business can help protect its value, the people connected to it and the legacy you want to leave behind.

Let us help guide you through this important financial and personal transition. Call us on (03) 9851 6500 or email hello@colledges.com.au to make a time for an initial conversation.