Having a conversation about the future…
Perhaps the trickiest conversation to have in a family business is when one generation relinquishes control in favour of the next. However it is also one of the most important discussions to have.
There are many business reasons to do it. The next generation may have new ideas – see the business differently; have a different world view. It’s a generalisation of course, but often there’s a better understanding of technology and a greater appetite to innovate. Welcoming your potential successors in early to make decisions gives them the best possible start. One business owner said to me that the most important business decision his father ever made was to make him a partner at 21 and give him the ability to sign cheques.
The biggest obstacle to overcome is communication. It is vital that the next generation know the plan for the business. Perhaps some children are not involved and are expecting to inherit some of the value of the business. Or perhaps one child who is taking on the business is not aware that part of the business is left to their siblings. As trusted advisors, we at Ballards often are the facilitators for such discussions. Family members may not like the intended plan but at least they know.
A crucial part of this knowledge is tax planning. I am working with a lot of businesses currently who are looking to understand what happens if they were to retire and gift the business to the next generation; what happens if they died with their boots on; would the business continue; would there be a tax problem. Knowing the implications for Capital Gains Tax or Inheritance Tax even if you choose to do nothing is so important. It’s a pretty simple maxim: It is always more costly to get out of a tax problem than it is to prevent it in the first place.
If you would like to discuss planning for the future, please feel free to contact Ben Allman on 01905 794 504 or email firstname.lastname@example.org