Successful succession planning for your family business

by Thomson Reuters

Family businesses operate through many different legal structures. Examples include:

• a partnershjp of individuals;
• discretionary trust;
• company;
• unit trust; or
• hybrid trust.

Business succession planning has become a very "hot topic" given the ageing population of business owners. It is all too often a last-minute consideration, but planning for succession involves many issues and should be done well before an owner exits the business.

Family Business Succession Guide, 2nd Edition, written by Sue Prestney, Partner at PwC Private Clients, and published by Thomson Reuters, provides a practical approach to family business succession planning. Owning and operating a family business can be greatly rewarding but involves complexities that result from the interaction of family and business. It is important that families get the right advice when dealing with the issues involved in passing on their life's work. Poorly handled succession can damage both the business and the harmony of the family.

This book takes the reader through a succession planning process using the family business constitutions to address the typical issues involved in succession and the interactions of family and business.

Containing many practical examples, diagrams and case studies direct from the author's first-hand experiences, this guide outlines the practical process to be following under a succession planning assignment. The book also helpfully includes planning checklists that can be used as templates by advisors and SMEs themselves to ensure they get off to a good start on succession planning.

Further information, including details of how to obtain your copy, is available on the Thomson Reuters website. It is too important not to be planned well in advance.

+CleardocsThomson Reuters

Top 10 ClearLaw articles to help you keep up-to-date

By Thomas Lam

Articles prepared by top 20 law firm – Maddocks – since 2005

ClearLaw, first published back in August 2005, is a monthly newsletter of articles about current legislative issues concerning SMSFs, CompanyRegistration, DiscretionaryTrusts and more. The articles are usually authored by relevant lawyers from Maddocks or Thomson Reuters' senior tax writers.

All Cleardodcs users receive an email alert once the articles are published on our website and can read these articles for free.

In this blog, I would like to share with you the 10 most popular ClearLaw articles to date:

1. UpcomingSMSF administrative changes: early discussion with the ATO Mar 2014 – upcoming legislative changes affecting SMSFs outlined by an ATO senior officer.
2. Companiesvs Sole Traders: Things you need to consider May 2010 – looks into some of the issues you need to consider when deciding whether to operate a business as a sole trader or through a "Pty Ltd" company.
3. ATOprovides warning on SMSFs which lend money (NOT borrow money) Sep 2011 – warnings from the ATO about SMSF trustees entering into lending arrangements on behalf of the SMSF.
4. Changeof SMSF trustee: practical tips for LRBAs Mar 2014 – tips and guidance to SMSF trustees to help them comply with their duties under superannuation law and LRBA documents.
5. Jointventurers v. Partners: Do they owe the same duties to one another? Jul 2007 – discusses two court decisions suggesting joint venturers owe one another the same fiduciary duties as partners.
6. CorporateTrustee v Individual Trustee: Key Differences for SMSFs Apr 2011 – highlights the advantages and disadvantages of choosing a corporate trustee over an individual trustee for a self managed superannuation fund and other trusts generally.
7. SMSFMembers overseas? Beware the residency trap Nov 2006 – an interesting and relevant read for any SMSF member who plans to stay overseas for more than two years.
8. Overviewof some things to consider when registering an Australian company Mar 2010 – a guide to some of the issues you need to consider when registering a 'proprietary limited' company.
9. Electronicsignatures: when are they effective? Nov 2013 – identifies risks and tips for dealing with electronic signatures.
10. Understandingthe differences between an agreement and a deed: lessons from 400 George Street (Qld) Pty Ltd v BGInternational Ltd Feb 2013 – discuss how deeds and agreements are distinct in two principal ways.

I hope you will find these articles interesting and useful. You can read our most recent ClearLaw articles here. Feel free to forward us topics you would like our lawyers to cover as ClearLaw articles.  Please note that ClearLaw articles are up to date at the time they are published. Old articles are not updated to reflect changes in the law.

New to Cleardocs – Partnership Agreement

Danni Kirwan, Marketing Executive

Over the past few months the team at Cleardocs (with some help from Maddocks), have been working hard on our latest product launch – the Partnership Agreement. The Partnership Agreement costs $198.00 and includes the agreement and all relevant minutes.

The Partnership Agreement was developed based on customer feedback. Some of you may remember completing a short survey about the types of Partnerships you or your clients use earlier this year. Many Cleardocs products are the result of customer feedback and suggestions, so if you have any suggestions for new products we would love to hear them.

What is a Partnership Agreement?

A Partnership Agreement sets out the rules under which a partnership must act. Unless there is an agreement in place all Partners are equal, and must share profits and cover losses equally. An Agreement allows the partners to record, amongst other things:

· How profits will be shared

· How much money each Partner brings to the Partnership

· How new Partners can join the Partnership

· How partners can be removed from the Partnership; and

· The different roles and responsibilities of each partner

Why should I consider a Partnership Agreement?

As I mentioned above, unless you have a partnership agreement documenting the different roles and responsibilities of Partners, it is assumed that Partners are equal. In reality however, many Partnerships are unequal. Some Partners may be entitled to a larger share of profits because they have contributed more to the Partnership, and some Partnerships may have varying roles and levels of responsibility dependant on the expertise and involvement of the Partners.

Over time these factors or the nature of the Partnership may change, so it is wise to have a written agreement to avoid future disputes.

What’s the difference between a Partnership and a company?

First and foremost, a company is a separate legal entity that needs to be registered with ASIC. A Partnership is not a legal entity, but you will need to register the business name you wish to trade with and apply for an ABN and GST (if applicable).

A company is required to pay tax at the company rate of 30% and lodge a separate tax return, whereas Partners in a Partnership pay tax on their earnings individually and at their own tax rate.

Companies need to be registered with ASIC, and pay ongoing annual review fees. Acting as a Company Director brings with it legal responsibilities, but also offers limited liability protection (hence the term “Proprietary Limited”). In the case of a Partnership, the Partners may be held personally liable for liabilities.

Where can I find out more?

Cleardocs can establish both Partnership Agreements and Company Registrations. If you are considering starting a business, you may wish to get some advice to determine the right structure for you. To find out more about the Cleardocs Partnership Agreement click here to view the product page. If you would like to know more about registering a Pty Ltd Company, click here.