Many business owners devote years to building client relationships, systems, intellectual property and goodwill. Yet comparatively little attention may be given to what would happen if the owner died, became incapacitated or could no longer manage the business.
Succession planning is therefore not limited to retirement. It is part of responsible risk management.
Identify what the business depends upon
A useful succession review should consider more than the business’s physical assets. Its value may also depend on:
- contracts and recurring clients;
- intellectual property and domain names;
- licences and regulatory approvals;
- access to banking and digital systems;
- key employees;
- company shares or trust interests; and
- knowledge held personally by the owner.
Where essential information exists only in the owner’s memory, even a profitable business can become difficult to operate after an unexpected event.
Coordinate the business structure with the will
A will does not necessarily control every business asset. Company property belongs to the company, while trust assets are governed by the trust deed. Partnership agreements, shareholder agreements and insurance arrangements may also affect what happens after an owner’s death.
Nevertheless, a valid will remains essential for dealing with personally owned assets and interests that form part of the estate. Holt & Macdonald’s guide on how to make a valid will in Victoria explains the principal requirements concerning capacity, execution, executors and beneficiaries.
The executor should also be chosen carefully. Administering an estate that includes a business may require urgent decisions about employees, contracts, debts and continuing operations.
Consider whether probate will be required
An executor may need a grant of probate before shares, accounts, real estate or other substantial assets can be transferred or dealt with.
Probate is the Supreme Court process that confirms the will accepted by the Court and the executor’s authority to administer the estate. The Holt & Macdonald guide explaining when probate is required in Victoria outlines the principal stages and circumstances in which a grant may be needed.
Reduce the potential for disputes
Business succession arrangements can create tension where some family members work in the business and others do not. Leaving the business to one beneficiary and other assets to another may appear fair when the will is prepared, but later changes in value can alter the outcome significantly.
An eligible person who believes that inadequate provision was made may also consider an estate claim. Holt & Macdonald’s overview of Part IV claims in Victoria explains eligibility, time limits and the factors relevant to these applications.
Effective succession planning brings together the will, business structure, ownership documents and practical continuity arrangements. Starting early gives the owner time to resolve inconsistencies and prepare the business for an orderly transition rather than leaving urgent decisions to family members and advisers.
