For You and Your Business
When we are in business, we can spend most of our time working in
our businesses and little time working on our businesses.
Planning for you personally and your business should include equity
and succession issues.
Equity and succession planning covers matters including bringing
a new "partner" in to your business; you or a business "partner" exiting your business (by sale, death or disability); and the sale
of your business. It is also relevant to insurances; superannuation
and financing of your business and personal matters such as your Will.
The keys to good equity and succession planning are communication
documentation and forward thinking. Remember the Boy Scout motto "Be
Any successful business requires good communication
between business owners and their personnel, customers, suppliers
and professional advisers.
Anticipating and agreeing how situations will be handled if they
arise will reduce the risk of conflict and dispute later and provide
mechanisms for resolution of disputes.
Businesses should document everything relevant
to the business.
The relationships between business owners; the business and it's
employees, contractors, customers, suppliers, lenders and others should
all be agreed and put in writing.
Practices and procedures concerning your business (employment, occupational
health and safety, manufacturing processes etc) should be documented.
Records of assets, leases, liabilities, insurances, borrowings, debtors,
creditors, supply agreements, customer contracts etc should be maintained.
Your professional advisers can assist you with the negotiation and
preparation of such documentation.
SOME LEGAL MATTERS
|| Structure - ensure
you understand the structure of your business (company, trust,
partnership, sole trader) and that it suits your purposes.
||Documentation - record
in writing the relationship between you and your "business"
partners. This can be done by a partnership agreement, shareholders
agreement or joint venture agreement. Such documents should include
valuations provisions (how to determine the value of the business
) and "pre-emptive rights" provisions (i.e. procedures
for existing "business" partners to be able to buy out
the interest of another partner in defined circumstances and a
mechanism for third parties to be able to join and become owners
of the business).
Ownership - clearly record
what is owned by your business. This notes the assets of the
business and affect its value.
- protect your business'
confidential information by having confidentiality provisions
or agreements with employees, contractors, customers, suppliers,
potential investors and potential purchasers.
- business and company names,
logos, brand names, practices and procedure are all intellectual
property and valuable assets of your business. Consider protecting
them by registration - as a business name, company name, trade
mark, patent or design.
|| Structure - check with
your accountant as to the most tax effective way to structure
||Capital Gains Tax -
when selling a business or shares in a company which owns a business,
obtain advice on any CGT implications of the transaction
||Stamp Duty - this is
payable on various transactions including the purchase of shares
||GST - check whether
GST is payable on the purchase price. There are requirements of
the sale of a business as a 'going concern' to make the sale exempt
FINANCIAL PLANNING MATTERS
|| Superannuation - seek
advice on how you should structure superannuation matters for
you your staff and your business. Remember that this is not your
core business and may be best placed in the hands of a professional
superannuation trustee or fund.
||Insurances - there is
a wide range of insurances which may be necessary or desirable
in the operation of your business and personal affairs. These
include insurance on you (whole of life, death, total and permanent
disability, income protection, trauma) and your business (plant
and equipment, buildings, assets, fire, public liability, business
expenses, directors and officers liability). Such insurances should
be checked when a business "partner" enters or exits
||Business Financing -
where business "partners" are coming in to or exiting
a business, the business' financing and leasing arrangements must
be considered. Exiting parties will want to be released from any
security (mortgage, guarantee) for borrowings or leasing of equipment
or land which they have provided and any monies lent to the business
repaid. Incoming parties may be required to provide security for
borrowings or leases.
|| Funding - the exit
or entry of a business "partner" will require an assessment
of the funding requirements of that transaction and the future
capital requirements of the business.
||Personnel - any changes
of operator in a business are always disruptive and need to be
carefully managed. If you are the business operator looking to
exit or allow a new person to become involved in your business,
do not underestimate the emotional adjustments which you will
have to make in doing this. You and the dynamics and culture of
your business will be affected by this.
Personal equity and succession planning is also important for you
and your business. This includes matters such as making a will, living
will and enduring power of attorney and having appropriate superannuation,
income protection insurance and work cover.
It is important to obtain legal financial and accounting advice and
work with your professional advisers to best organize equity and succession
planning matters for you and your business.
If you would like further information on equity and succession planning
for you and/or your business, please contact us. We can also provide
you with other articles and materials to assist you with this.
We are happy to work with you and your other professional advisers
to enable you (when appropriate) to grow your business and exit your
business in an orderly fashion.
This article is general in nature
and for information only. It should not be acted upon without obtaining
specific legal advice.
©Anne Hodgson & Co Lawyers,
Tel: 03 9578 7444 Fax: 03 8677 2962 Email: firstname.lastname@example.org