Today is Yorkshire Family Business Day – a day to recognise and champion family firms and the significant contribution they make to our region’s economy.

Typical characteristics of successful family businesses can include stability, shared values and strong commitment – but a common challenge is succession planning.

Consultancy firm PwC’s most recent survey of UK family businesses* found that while many want the next generation to take the business forward, only 18% have a formal, documented plan for this – although it’s clearly a problem recognised by owners, as 53% of those with no plan intend to develop one.

Succession planning is a critical element of responsible business management. It’s not just about creating a legacy, although that may be an important consideration for some owners. It’s also about creating the conditions for the business to thrive in the future and ensuring continuity and stability for employees and other stakeholders.

So, what are the options for your family business to remain a going concern once you’re ready to start the next phase of your life?

If you’re among the many business owners who wants to pass ownership of your business to one or more of your children, then the earlier you can start planning for it the better.

It’s worth remembering that ownership succession and management succession are two separate things, which do not have to occur at the same time.

Things to consider in planning for a smooth transition through the generations include arranging power of attorney, making a Will, putting in place an efficient tax strategy and the transfer of shares and voting rights.

Other common options for succession planning beyond the family include selling the business to an external buyer; or a management buyout (MBO), where managers in your business raise the finances to take on joint ownership.

Both these routes offer advantages and disadvantages, so also need careful consideration.

Here are our top tips to help you take the first steps towards a successful transition of your business to new hands.

  1. Consider your goals for the business and whether these are shared by the family members you hope will take over ownership / management. It’s not enough to make assumptions – communication is key.
  2. Be clear about your objectives and timescales for succession planning: are you planning with a known, specific date in mind, or in the first instance is it to ensure business continuity in the event of unforeseen circumstances such as your death or disability before retirement?
  3. Make the most of professional advice. You’ve spent years, or even decades, building your business, and consulting an expert regarding the legal and financial implications of succession planning can help ensure a lasting legacy.

We’re delighted to be supporting Yorkshire Family Business Day.

For expert advice on succession planning for your business contact our Family Business lawyers at amanda.simmonds@luptonfawcett.law or alternatively on 0113 280 2131.

*9th UK Family Business Survey, PwC, 2018

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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