Retirement Planning Succession Wealth

Preparing For Exit And Protecting Your Wealth

Mike Wardlaw from Tilney sets out the key considerations for business owners

Building a successful business takes years of hard work and sacrifice.  Moving on from your business is one of the most important decisions an owner will make – but it’s one that is often put off until it’s too late.

Planning well in advance how you will exit will ensure a smooth process and can unlock the real value of your business, whether you want to sell it, pass it on to the next generation, or whether the intention is to take money out of it now to support your retirement, or perhaps an alternative venture.

Having advised many successful business owners and their families, Mike adds “the first question to be settled revolves around the future of their business and their future role. For example will it be a whole or a partial exit?”

“This will include a consideration of whether you may want to pass it on to family members during your lifetime or upon death, or whether you want a ‘hands-off’ sale to a third party.”

Each of these questions will influence the tax position, how existing staff members need to be incentivised and how the business should be prepared ahead of time.

Smith & Williamson, who recently merged with Tilney, addressed succession in their most recent survey which found that family-owned businesses are not leaving succession to chance, but that they base family involvement on enthusiasm and merit.

Few believe their children have an automatic right to succession and are most concerned about ensuring they have a family member with the ability and inclination to take over.

The survey indicates that while 80 per cent of family business owners believe it is important for family members to be involved in the business, 78 per cent think it is important that they have business or professional qualifications if they are to enter an executive role.

Before this process begins however, you will need to establish how much your business is worth and the type of exit that is appropriate to you. Do you want to retain a relationship with the business after exit, whether as a consultant, committed shareholder or in an executive role?

“However someone exits their business, they will usually be left with a significant lump sum which may have to last for some time,” says Mike.

“There will be financial planning consequences to any exit and there could also be issues around inheritance tax which need to be managed. If there is a possibility that you will hold the business until you die for example, it is vital to ensure that you minimise inheritance tax.”

“Having worked hard to build a business, you may want to retire, use the capital to start again, do something else in between or pass it on to someone else. Whether you want to transfer the business to the next generation, or discuss a management buyout, trade sale or setting up an Employee Ownership Trust, which are becoming increasingly popular, it’s never too early to ensure that your personal wealth and that of the business are structured as efficiently as possible.”

Find out more by emailing Mike at family.business@tilney.co.uk

Important Information
Nothing in this article is intended to constitute advice or a recommendation and you should not take any financial decision based on its content. Investments can go down as well as up and you may not get back the amount originally invested. Tilney Financial Planning Limited. Authorised and regulated by the Financial Conduct Authority.

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