Considerations for retiring business owners
17th June, 2015
You are the owner of a successful business and you are thinking about retiring in the next few years. What do you need to consider?
Have I got the right management in place?
They might be your exit if they want to buy the business from you – and will almost certainly be required by purchaser. It is common for the seller to be required to stay around for a month or two post-completion to deal with a handover. If the next generation of management is not in place it can mean you could be required to stay for longer.
How can I minimise tax problems?
The key to this is making sure that the business (or more usually the shares in the company which owns the business) qualify for Entrepreneur’s Relief (bringing the capital gains tax rate from 28% down to 10%). To achieve this takes time to organise – we would always advise businesses considering sale to contact us to discuss this at least 18 months before any proposed sale. This then gives time to ensure the right people own shares for long enough, and also remove from the business any non-business assets.
What preparation can I do?
Many businesses receive unsolicited approaches from potential buyers. If these come at the right time, they can provide a good exit at a good price. It pays to have all of the right documents and processes in place to be able to answer the questions raised by the potential buyer. Their due diligence questions will cover every aspect of your business and is very detailed and time consuming. Making sure you have the right contracts, registrations and no skeletons is key.
Do I need to review my will and Inheritance tax planning?
It is always worth reviewing your will whenever circumstances change. This will give the opportunity to review inheritance tax and any planning to mitigate amounts payable. Shares in a trading company will often qualify for Business Property Relief meaning no inheritance tax is payable. Once you have sold you company and converted it into cash (and paid capital gains tax on the proceeds), your estate could have to pay inheritance tax on the remaining cash or other assets on your death.
Have I instructed the right partners to support me?
You are likely to need a good selling account and also a tax adviser. Having working on buying and selling businesses for many years, we in the Aaron & Partners’ Corporate Team know most of the key players in the market.
You also need a good lawyer! Our team has a long and successful track record in this area.
If you want to discuss this or another legal issue in more detail, please contact Hugh Strickland at Aaron & Partners – [email protected] or call 01743 294120 to arrange a free 30 minute no obligation meeting.