Preserving the personal financial security of the company owners and their families is key to successful succession planning according to Deloitte Tax Partner, Craig Holland.

“In addition to dealing with corporate issues, careful consideration should be given to related issues including individual retirement, goals setting, cash-flow planning, income and capital gains tax , life insurance planning and investment portfolio tactics.

“Business owners anticipate reliance on cash flow or sales proceeds from their business to fuel retirement-related living expenses. If this is the case then the retiring owners need to ensure the source of cash flow is adequate and protected,” Mr Holland said.

“A retirement strategy needs to start with goal setting and articulating the business owner’s vision for their retirement.  By formalising creative retirement goals and developing a timetable for achieving these goals will prove to be an invaluable exercise.

“Business owners accumulate net worth in their business through goodwill which can then be subject to tax on sale. It is important to look at tax exposure as the Tax Office will exhibit no ambiguity on valuing the business.”

Mr Holland said that an investment advisor who understands all other components of the succession plan can better account for income tax complications, retirement needs or other special cash requirements.

Deloitte today released the third of an eight-part series which looks at the transition to the successor, including how to manage and develop talent, advantages and disadvantages of different entity structures, contingency planning and financing options. This part also focuses on these business elements and how they should be incorporated into an overall succession plan.

Part four of the eight part The art of business succession series will be available in July 2007.

Related links:

• read part three of the series: Personal wealth management
• listen to the podcast.