Preparing for exit and protecting your wealth

Smith & Williamson sets out the key considerations for business owners

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Krista Woodman
Published: 07 Jan 2020 Updated: 13 Jun 2022

Smith & Williamson sets out the key considerations for business owners

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Building a successful business takes years of hard work and sacrifice.

Moving on from that business is one of the most important decisions an owner will make – but it’s one that is often put off until it’s too late.

Planning well in advance how you will exit will ensure a smooth process and can unlock the real value of your business, whether you want to sell it, pass it on to the next generation, or whether the intention is to take money out of it now to support your retirement, or perhaps an alternative venture.

Having advised many successful entrepreneurs on business exit strategy, Krista Woodman, Director of Private Client Tax Services at Smith & Williamson in Birmingham, says the first question to be settled revolves around the future of their business and their future role.

“Answering this question will help you decide whether it should be a whole or a partial exit,” says Krista.

“This will include a consideration of whether you may want to pass it on to family members during your lifetime or upon death, or whether you want a ‘hands-off’ sale to a third party.

“Each of these questions will influence the tax position, how existing staff members need to be incentivised and how the business should be prepared ahead of time.”

The issue of succession was the focus of Smith & Williamson’s latest Family Business Survey, in which family businesses in Birmingham and beyond were questioned on a range of topics.

The survey found that family-owned businesses are not leaving succession to chance, but that they base family involvement on enthusiasm and merit.

Few believe their children have an automatic right to succession and are most concerned about ensuring they have a family member with the ability and inclination to take over.

The survey indicates that while 80 per cent of family business owners believe it is important for family members to be involved in the business, 78 per cent think it is important that they have business or professional qualifications if they are to enter an executive role.

Before this process begins however, you will need to establish how much your business is worth and the type of exit that is appropriate to you. Do you want to retain a relationship with the business after exit, whether as a consultant, committed shareholder or in an executive role?

“How ever someone exits their business, they will usually be left with a significant lump sum which may have to last for some time,” says Krista Woodman.

“There will be tax consequences to any exit and there could also be issues around inheritance tax which need to be managed. If there is a possibility that you will hold the business until you die for example, it is vital to ensure that you minimise inheritance tax relief.

“Having worked hard to build a business, you may want to retire, use the capital to start again, do something else in between or pass it on to someone else.

“Whether you want to transfer the business to the next generation, or discuss a management buyout, trade sale or setting up an Employee Ownership Trust, which are becoming increasingly popular, it’s never too early to ensure that your personal tax profile and that of the business are structured as efficiently as possible.”

For further information on any of these issues please contact Krista Woodman.

By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details correct at time of writing.

Smith & Williamson LLP
Regulated by the Institute of Chartered Accountants in England and Wales for a range of investment business activities.
Smith & Williamson LLP is a member of Nexia International, a leading, global network of independent accounting and consulting firms. Please see for further details.
Smith & Williamson LLP is part of the Tilney Smith & Williamson group.
Registered in England No. OC 369631.


This article was previously published on Smith & Williamson prior to the launch of Evelyn Partners.