Keeping the business in the family when you decide it’s time to retire is a common choice for many business owners. However, ensuring the change of hand is carried out effectively is seldom done right.
If you plan on handing your business over to your child/children or any other family member, there are specific precautions you should take to ensure that the process you use is not only compliant with Australian business and taxation laws, but so that the business model is protected in a way that you so wish.
Consider the following:
Meetings
When changing ownership of any business, to family or someone else, having meetings to discuss various aspects of the changeover helps create a seamless change. Meetings should be periodic and should not be over complicated by discussing too many aspects of the changeover at once. You should plan out what will be discussed in each meeting when you decide you are going to change over ownership.
Transition
When changing ownership of a business, it is always wise to consider doing so in a transitional manner. By using a transitional approach, it allows you to teach your children the ways of the business and the correct process of doing various tasks, in order to keep the business running the same as it always has. This makes the change easier for customers and clients. After the transition has taken place, they can choose to make changes to the business model that they think will improve the business, but they will be doing so with an appreciation and understanding of why things have been done the way they have in the past.
Know the boundaries
One of the biggest obstacles of handing your business over, particularly to your children is mentally preparing for what this change will mean. A common mistake many business owners make when handing the business over is thinking they are still in charge; this is not the case. By overstepping the boundaries and trying to be over-involved after you no longer own the business, you can cause conflict between yourself and your child, which will inevitably impact negatively on the business. You need to respect your child as a business owner and let them run the business on their own. Of course you can be there as a soundboard and offer advice should they need it, but anything more can become overbearing. To avoid doing this, you need to prepare yourself for what no longer owning the business will mean; how are you going to fill your time that used to be spent working?
