October 2012 Newsletter

In this edition:

Welcome

Fuel tax credits - changes from 1 July 2012

Will your business survive? Feature article on business succession planning

ATO assistance for small businesses experiencing short-term financial difficulties

Obligations and responsibilities for SMSF trustees

What would you do if a business partner was to suffer from a trauma event, become totally disabled or die? Involuntary exit from the business must be carefully planned for as part of a business succession plan. This planning is needed to ensure the preservation of a business for the continuing owner(s). It can also provide the departing owner or their estate with funds equivalent to the value of their share of the business.

Business Succession Planning is just one strategy that business owners can use to exit their business. It is about developing a strategy to ensure a smooth and trouble-free hand over following a traumatic event, disablement or death.

• What happens if an owner suffers a tragic event and there is no succession plan in place?
  Third parties could end up with an unacceptable degree of control in your business

• A deceased owner's estate could demand that a business be wound up

• It could be necessary to negotiate additional borrowings or face asset depletion

• The stability of the business could be questioned by suppliers and customers

• Lending institutions could seek repayment or re-negotiation of loan facilities.

Without a plan, a business is vulnerable to forces that may hasten self-destruction.


Buy/sell agreements and business succession planning
Buy / sell agreements are part of the business succession planning process. If a person dies or is unable to continue in a business due to total and permanent incapacity or a traumatic health event, then such an arrangement ensures the preservation of a business for the continuing owner(s). A buy/sell agreement can also provide the departing owner or their estate with funds equivalent to the value of the departing owner's share of the business.

Protection for the business
There are three different areas of your business that need to be considered in a Business Succession Plan:

Asset Protection – Provides cover for 'Capital Purpose' debt in the event of the death or disability of a Business Principal or key person

Revenue Protection – Provides cover for the loss of Revenue generated by a Key Person in the event of their death or disability

Ownership Protection – Provides funding for Business Succession in the event of the death or disability of a Business Principal

What is a buy/sell agreement?
A buy/sell agreement is made up of a transfer agreement and a funding agreement.

The transfer agreement relates to the transfer of the departing owner's interest in the business to the surviving owners should a trigger event (commonly death, disability or a traumatic health event) happen.

The funding agreement relates to how the departing owner or their estate will be compensated for surrendering their interest in the business.

Insurance policies are a common way to fund a buy/sell agreement.

At GCC Financial Planning we work closely with your accountant as well as a specialist Business Succession Planning lawyers to provide you with the information you need regarding what funding mechanisms are available, what the tax implications are, how a business succession plan is created and what our process is to implement this strategy for your business.

Please note this article is not advice and is general information only. Should you require any further information please contact GCC Financial Planning or your financial advisor.

For more information, please contact us.

Corporate Authorised Representative and Corporate Credit Representative of Securitor Financial Group Ltd ABN 48 009 189 495 AFSL 240687