6 Tips For Protecting The Future Of Your Business
Running a business can be all-consuming, often to the point directors and owners are so focused on the service or product outcome for customers, that protecting the future of the company takes a back seat.
Here are 6 tips all owners should consider to ensure the business is in safe hands if anything were to happen.
1. A suitable Will
For an individual, the impact of not having a Will is clear. For business owners, the effect of not having a valid Will that considers the business would be detrimental, not only to your beneficiaries, but also your business partners, employees, and the company itself.
In your Will, you can decide who will be responsible for the continuation of the business if you were to pass away. It is crucial to have contingency plans in place, so the shares of the business are passed on exactly as you intend, and that your family, shareholders, employees, and customers are protected.
2. Plan for estate taxes
While there is no estate tax in Hong Kong, company shares are considered moveable assets, meaning they are governed by the laws of your country of domicile, and not necessarily under Hong Kong law, even if the company is registered in Hong Kong. Many people are unaware of this and may end up liable to pay unexpected inheritance or estate taxes.
If you are not considered Hong Kong domicile, it’s crucial to consider company shares as part of your estate based on the laws governing your country of domicile, and plan accordingly.
3. Have a succession plan fit for today and tomorrow
Having a succession plan is essential should you want the business to continue after you retire or pass on. However, many people put this off as a job for the future – ‘I’m too young to think about retirement, and nothing will happen to me!’.
What if something were to happen to you today, however, and you were not able to operate your business in your current capacity? Who would take over your role?
Having a succession plan that is fit for today and the future is essential to ensure business as usual if you were to become incapable of working, or if you passed away.
Take the time to create a sensible succession strategy for all key people in the business.
4. Assign power of attorney
A Will designates who would own your business shares if you were to pass away. But what if something were to happen that left you unable to make sound financial decisions for the business?
For example, who would make decisions on payroll, and be able to pay your employees? Business owners should assign power of attorney to a trusted partner or employee, who would be able to make financial decisions on your behalf, should you be in a position where you were unable to.
In a business with two or more partners or shareholders, Keyman insurance covers the value that crucial people bring to the company, and pays out to the business as a beneficiary, should a partner pass away. The surviving partner(s) can then use the insurance payout to buy out the deceased partner’s beneficiaries, rather than having to accept the family of a lost partner as equal shareholders of the business – something that may not be in the best interest of the company.
Beyond the passing of a shareholder or business partner, the effects of the Covid-19 coronavirus have shown us that many small and large businesses don’t have sufficient liquidity to meet financial obligations for even a short period if cash influx was to slow or stop altogether. Insuring your business for similar events in the future can prove crucial to keeping the company afloat during the tough times.
6. Organise important records
All important documents and records should be kept safe and known to all key people and successors.
This includes things such as your business plan, financial statements and employee records. Having all essential documents organised and the location known avoids potential problems down the line and ensures a smooth continuation of your business.
Estate planning as a business owner may not have been a priority for you in the past. But having a suitable plan in place will give you peace of mind that if anything were to happen, your business would be able to continue with as little disruption as possible.
Get in touch today to make a plan.