HomeAbout UsServices News and ViewsToolsInformation Centre

How do I plan for succession?

Unless you intend to keep on working, there will come a time when you wish to relinquish the reins of your business to someone else. This may be your sons/daughters or fellow shareholder/partner or someone else. The way in which the transfer of the business takes place can have consequences which may place you at a disadvantage. The business could have taken you a long time to build up so it is crucial that you keep as much of it as possible.

On the assumption that the business is to be sold (as opposed to you remaining as a director, taking profits), there are a number of things to consider.

  • How will you value the business?
  • What tax will be payable and can it be mitigated in any way?
  • What opportunities exist to use the business to build up pension benefits before sale or retirement?
  • What opportunities exist for the continuation of any life assurance after retirement?
  • To what extent will the sale proceeds (or other wealth) be affected by any move abroad?
  • Do you intend to retain any shareholding? If so, how much?
  • Is the business to be a straight gift to your children?

Planning for succession involves not only the sale of the business whilst alive, but also involves the circumstances surrounding death. For example,

  • Where a shareholder of a family business dies, to whom will the shares pass?
  • How will the remaining shareholders feel about the shares passing to someone other than them (perhaps because they will go to your spouse)
  • What consideration has been given to any IHT liability?
  • What formal arrangements exist between shareholders/partners to buy the deceased person’s shareholding?

Where someone retires from a business they have built up, there will undoubtedly be emotional attachment and this could get in the way of objective assessment of the disposal.

It is worth bearing in mind that an exit strategy is always worth considering before any of the above eventualities take place.

Here at Quest we can help to formulate how to exit from the business in the most tax favourable way possible. This will involve you, your co-directors or other partners, your accountant and possibly your solicitor.

For an informal and exploratory discussion, contact us and we'll get in touch, or call us direct on 01324 832 715.