It is just as important to have a business succession plan in place to help safeguard your family’s future and the future of your farm or agriculture business as it is for any other type of business. But the first step in this planning process, whether you are looking at business transition post-retirement or after death, is to have a transparent and honest discussion with your whole family, so that everyone is aware of the plan and can have their say. That is the key to effective succession planning.
The next stage is to call in the specialist succession planning accountants at SFB, who are highly experienced in the area of agriculture business succession planning. We will help you develop a succession plan that will protect your finances, assets, property and family. Then, when the time is right, and because all of the important exit planning work has already been done, it will be a smooth transition of ownership to the second generation (or the younger generation), ensuring the continuing legacy of your farm.
What should you discuss during this planning process?
There are many things to consider with succession planning, and the key ones are detailed below. However, one of the most important aspects of the agriculture sector is that most farms are family-owned businesses, which means that the family business succession is always at the forefront of things.
- The long term direction of your farming business. This is vital and looks at where the business could be, or wants to be in the next 10, 20 or 30 years. Having a plan for the future, which factors in changes in the industry, changes in consumer tastes, possible new Government policies, whether or not to diversify will all play their part on the end game, which is transferring ownership. The surviving members of the family who take over the running of the business are likely to have a business fit for purpose into the future if this work is done properly.
- Each family members current and future roles. This is all to do with understanding what the skills and competencies are of the family members who will succeed into the various roles of running the farm business in the future. It’s also important to know what the ambitions of each family member are, and who are the best members to have leadership roles. In addition, the leadership pipeline should be addressed to consider future contingencies if circumstances and plans change.
- The skills development and experience the next generation requires. In order to ensure that the family succession plan actually works, it is key to know what current experience the next generation has and put in place a plan to build on this experience and develop the skills required. This could include leadership development, financial planning skills and sales and marketing knowledge, as well as the skills needed for farming. Making sure these skills are in place will minimise disruption and help ensure a smooth management succession.
- The business’s assets and its ownership. The assets of the estate and who owns what are not always widely known before the farm succession process starts, and this needs to be addressed at an early stage. Then, of course, the discussion as to how these assets and their ownership will be shared amongst those family members who are going to take over the running of the farm and be involved in estate administration. This is often an area that needs sensitive handling on a people level as well as a financial and business level.
- The future of the family members that may not continue in the business. It is quite often the case that not all family members will want to continue working in the family business, and it needs to be discussed how they are to be treated. Do they maintain a shareholding, for example, and what happens should they decide they wish to sell their shareholding at some point in the future. All of this is part of the business succession planning process.
- Individual levels of income. In our experience this is a critical thing to discuss and get right. Not only does it affect income levels of all family members involved in the succession, but also income tax and estate tax planning.
- Where each family member will live. In cases where there might be a number of dwellings on the farm, the decision as to who lives where is an important one which plays its part in ensuring that the succession plan is carried out smoothly and harmoniously.
- Inheritance Tax Planning. Last but not least, our experience is that it is never too early to start thinking about inheritance tax, especially in matters of business succession. As ever, the aim of inheritance tax planning is to help reduce the level of inheritance tax for all family members. It also involves advising family members on: the use of trusts in a tax efficient manner; working with financial advisers to ensure investments are inheritance tax efficient; advising on what reliefs the family is entitled to and how they can be preserved.
Talk to our expert accountants about your Business Succession Plan
To discuss the development of a succession plan for your agricultural business that deals with all of the succession issues that arise with a family run firm, please contact SFB on 03333 444 171 or email firstname.lastname@example.org.