Remarkable Journeys with Jess Fox: Conversations with our clients, people and community. Listen now.
By: Nicole Bradley
26 Nov 2024 4 min read
Ownership can also motivate individuals to perform better as they have a vested interest in the company's success. While the first step is often to understand the tax implications and find ways to minimise the burden, what’s often overlooked is the need for clear communication within the family. It's essential to discuss and agree on what ‘good’ looks like for business growth, ensuring everyone is aligned and satisfied with a unified approach. So, what should be considered in these conversations?
When issuing shares to your children, it's important to consider the risks if a relationship breakdown occurs. Having open discussions about hypothetical situations can help understand the best ways to protect the family business. Establishing a framework for 'in case' scenarios allows for these conversations to happen before any emotions come into play.
Once the family agrees on what good would look like in these scenarios, it’s time to engage with your solicitors to put the necessary documentation in place for the family to ensure the wealth you have created is protected from the unknown.
The answer for each family will be different, but it’s important to have transparent and open conversations to understand how certain scenarios will affect family members working in the business. It’s critical to hold numerous discussions about what the future of the family business will look like should there be disruptions or unprecedented circumstances like an unexpected loss.
If something happened to a sibling, would family members feel comfortable running the business with an in-law? If a sibling’s partner remarried, would people be comfortable running the business with their new spouse? While most of these questions would be hypothetical, it’s good to have these discussions in an open and honest forum to understand what everyone would feel comfortable with.
While it can be disheartening and challenging when your children don’t want to take over the family business, there are ways to transition the operations smoothly. Considerations should be around what good looks like for your family legacy, who will be offered their shares or timeframes on when shares are paid.
It’s important to hold open and honest conversations with your children at all stages of their life. Stay interested and curious about their career aspirations and whether they have an interest in taking over the family business one day. When done well, succession planning should be flexible and allow for members of the family to opt out if they want to. Separately, it ensures certainty for all parties, and everyone will be aware what the exit will look like when it happens.
Now is the opportune time to begin conversations about the Rising Generation upskilling on their financial acumen – this includes reading financial statements, understanding how remuneration for a family member working in the business is different to how an owner is remunerated.
Should they want to take over the family business, the Rising Generation must know the ins and outs of cash flow management, asset protection, and how family can be remunerated from different entities. There needs to be a focus on equipping the next line of leadership with skills to measure, interpret and make decisions in the business that will positively impact the bottom line.
The conversations referred to above can be very uncomfortable and difficult for a family member to start. As external facilitators, we can assist in coordinating these conversations and building a roadmap for the next steps.
Register your interest in our Rising Generation Financial Acumen course below and gain a better understanding of your business and family financials, options to find the business, and how to protect the family assets.
New “EET election” option for discretionary trusts to avoid the minimum 30 per cent without having to restructure, but creates inflexibility.
For many successful families, creating wealth is only the beginning. As your businesses, investments and family interests grow, arrangements that once worked well can become difficult to manage.
The announced 30 per cent minimum tax on discretionary trusts creates significant challenges for private groups.
