Legal comment by Mark Illidge

June 2007

Let's say you have built up a successful business on your own or in partnership.  What happens to this business on your retirement or death?  Proper business succession planing will allow for a smooth ownership transition, allowing you to exit the business with minimum fuss whilst the business maintains a level of continuity for the new owners. 

The transfer of ownership of the business assets may be achieved via your Will or a Buy/Sell Agreement.  A Buy/Sell Agreement will outline how the departing party should sell and the other party should buy the business assets, as well as the events that will trigger the buy/sell such as death or incapacity of one of the partners.  It is not hard to imagine the negative consequences that may flow from failing to put in place a business succession plan, particularly if a sole trader or the partner handling the day-to-day management of the company dies or falls critically ill unexpectedly...it does happen.

But major catastrophes aside, let's take a step back.  If you are about to start a business or buy an existing one, begin with the end in mind.  While it's easy to get caught up in the thrill of the new challenge and visualise the potential rewards, ask yourself "How might I exit this business, and when?".  Answer this question by looking at different catalysts to the exit (eg. illness, business failing, business thriving, retirement) and then plan accordingly.  Also, if you are going to be in a partnership, consult your accountant and lawyer regarding the business structure, and then put in place a Partnership Agreement.  While you may never need to refer to it, it is much easier to have an agreed manner for dealing with issues that may arise. 

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