Family owned and run businesses are incredibly rewarding, but they can also become fraught with tension or miscommunication as circumstances change and the baton is passed onto the next generation. These are some of the most common issues that can arise.
Making financial decisions between the generations
All too often the founding generation of a family business will have a very different financial approach to the younger generations that are following in their footsteps. This can cause tension and obstacles in the day-to-ray running of the organisation. Your Sydney business accountant can provide impartial advice based purely on the numbers rather than emotions for those big financial decisions, for example whether to invest in product development or team expansion.
Retirement planning is a very common financial issue when it comes to family businesses. The challenge is in arranging the business’s finances over time so that the founder can enjoy a long and comfortable retirement without taking vital resources away from the ongoing business. There are also plenty of ways to structure savings and retirement funds so the business isn’t paying more tax than is necessary. It is never too early to start retirement planning for all generations within a family business with your financial planner.
The founder of a family business has worked hard to build up the equity in that company, but around 70% of family businesses fail or sell before they are passed onto the next generation. It’s good business to spend time planning the steps to succession so that the business won’t be negatively impacted by a handover. The sooner you speak with your legal and financial specialists about this, the better.
When a family business has created wealth, there are almost always questions of how to protect those assets. This includes not only carefully positioning legal ownership to safeguard assets against liability, but also taking care with tax planning and business structures such as trusts. It’s worth speaking with your family asset protection company every time there is a change in circumstances to ensure the right financial measures are still in place.
Formalising business plans and financial matters
It’s all too easy to make informal plans within a family business, but this can commonly lead to misunderstandings, frustration and uncertainty. Your financial planner and accountant can assist with written strategies and clear plans so everyone is kept informed and working towards the same goals.
Communication and clarity is key in any family business – quite often, simply addressing the challenge or concern objectively will smooth any ruffled feathers and provide the pathway to growth for the business.
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