If you own a Business have you prepared a Formal Succession plan?

business owner with team

n a 2017 report prepared by Charles Sturt University and The University of Adelaide examining Estate Planning practices in Australia, the majority of business owners surveyed had no formal succession plan. This was an astonishing 75% of the 315 business owners surveyed.

As a business owner, you understand the importance of planning for the future. These plans could include leadership and ownership transitions which are crucial for ensuring business continuity in the event the owner/s are incapacitated or pass away. According to the report, despite the importance of succession planning, just over 25% of business owners prepared a formal succession plan. This was a slightly higher figure than previous research but came as no surprise given the very low percentage of Australians with a legal Will.

The authors of the report are concerned that Australia’s ageing population makes it even more imperative for formal business succession plans. Failure to do so will place many businesses at risk from the lack of adequate planning for transition as well as potential disruption, uncertainty and conflict if the owner is incapacitated or passes away.

Of the 317 business owners surveyed the majority were sole traders  (24.9% or 79 respondents) followed by partnership (22.7% or 72 respondents) while just over 12 per cent indicated they operated their businesses under a trust (39 respondents) or company structure (38 respondents). Just over a third of the respondents indicated they were unsure of the actual legal structure of their business.

It is concerning that most of those who owned businesses do not have a formal succession plan nor do they know what will happen to the businesses they are involved with when they pass on. The lack of planning in these regards can cause significant problems for employees, other stakeholders and the continuing operation of the business down the line.  A comprehensive Estate Plan can address formal succession planning for a business owner. It’s imperative that all business owners have one in place and review their Estate Plan on a regular basis.

The full report, “ESTATE PLANNING IN AUSTRALIA” can be found by clicking this link https://researchoutput.csu.edu.au/ws/portalfiles/portal/19332794/Estate_Planning_in_Australia_Final_Report_021017.pdf

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