What happens to your business when you die or become disabled?
Most business owners are flat out managing staff, payroll, creditors, customers and technical changes, which means there is little time left to plan for risks.
here are a few suggestions in getting things sorted:
1 Enduring Power of Attorney– Get this signed and make sure it covers trusts and companies as well as your personal capacity for financial and health matters;
2 General Power of Attorney– Where appropriate you should sign a General Power of attorney if you are sole Director of your company to make it easier to deal with banks and other companies with whom you contract;
3 Insurance- Get insurance to cover at least part of your business debt level, cash flow requirements for 6 months and immediate expenses. In terms of goodwill, if you have a shareholder or partner you must insure for the value of your business interest or equity.
4 Business Succession Agreement – You must have a written agreement with your shareholders or partners that provides for a conditional grant of an option to acquire the balance business from you or your family trust as owner of the share. If it is not written correctly stamp duty and capital gains tax will rise as at the date of the Deed leaving a worse revenue outcome for your family.
5 A Valid Will on the best terms – Everyone should take the opportunity to prepare a valid Will that covers all of their circumstances including business interests companies, shares, trusts and property, on terms that provide the best outcomes for their family. It is a small price to pay for a well drafted Will if it provides protection of beneficiaries for bankruptcy, disability and matrimonial disputes. By drafting key terms you can ensure that tax is minimized in the family group including children being taxed at adult rates and a wider class within which to distribute income such as trusts and companies. You can cover forgiveness of loans between family companies and trusts where there have been distributions for tax but no payments made.
6 Digital Assets – You should make sure adequate wording is included i your Enduring Power of Attorney and your Will to cover access to and ability to deal with digital assets. These include bank accounts, investment portfolios, family photographs and social media accounts. Make sure you cover ownership of domain names, email accounts and cloud based back up accounts so that your chosen attorney or executor can gain access to and control these assets according to your wishes.
7 Advance Health Directive Take the time to get this documents reviewed by your General Medical Practitioner and make your decisions regarding end of life treatment. Do not leave it open for family members to argue about pain relief, CPR, hydration surgery, antibiotics or other treatments when you may have lost the ability to communicate, are terminal or end up in a permanent coma.
8 Binding Nominations for Superannuation- Many of our clients have not checked to ensure their Wills match the updated Binding Nominations that their accountant or financial advisor have put in place. Given the substantial changes in the legislation starting on 1 July 2017 we recommend all clients review this aspect as a matter of urgency. Do not wait until it is too late as your family will suffer the consequences of addition tax payable on your super nest egg built up over many years.
So these are just 8 simple points to tick off to ensure you are in the best possible position as a business owner. Take the time to get a review. It will only be 1 hour of discussion and is best done with your accountant/ financial and legal advisor together.