Any prospective franchisee has a raft of concerns to address before setting out on the path to their own business, and many of these relate to the minutiae of small business operation. An often overlooked aspect of business planning is the exit strategy, and more specifically, what will happen in the unfortunate case of the death of the business owner or franchisee.
If this is you, youĂre not alone _ about half the adult population in NSW (with similar numbers reported in other states), has overlooked a piece of paper that is vital to the wellbeing of family or business partners _ a will.
Inheritance issues
NSW Trustee & Guardian, as the former Public Trustee NSW, was established over 95 years ago by an act of parliament and is the state’s leading will maker. It has written and administered hundreds of thousands of wills and various types of estates for business owners large and small.
Small business owners should have a business succession plan which deals with their business and personal assets, and a will can be an integral part of this, says Imelda Dodds, NSW Trustee & Guardian.
You need to think about who will inherit the business or its proceeds; who may have an option to purchase it; whether it will continue to trade after you have gone; and how your family will benefit if the business continues.
It is important to consult a professional about how your will impacts on all the issues. There are also complicated legal, financial and tax issues to consider _ so it pays to make sure it’s done properly, or you risk leaving behind a mess for everyone concerned, she says.
Our Good Will Week website www.goodwillweek.com.au may be a helpful starting point for business owners. It provides quick access to clear and simple information on many of the things to consider when you write your will, prompting a list of things to consider and talk about to NSW Trustee & Guardian, she adds.
Director of client services, Tony Steinmetz, explains the structure of the business will have an impact on what happens in the case of death.
Whether or not a business is a sole trader, a partnership (with or without a formal partnership agreement will alter the outcome), a company with shares (who will get the shares?) or a tenancy in common will define in law what happens to the business, he says.
From a planning perspective, put your mind to what you would like to happen if you’re not around, advises Steinmetz. If you’re in a partnership with your spouse, will they get your share of the business?
Get proper estate planning advice because there are different tax regimes to consider, he says.
The franchise puzzle
And while the structure of the business has an impact on what happens in the event of death, this is complicated in a franchise where the franchise agreement will set out certain provisions or controls in regard to the ongoing franchise.
The franchise agreement puts another piece in the puzzle, Steinmetz admits.
Franchising lawyer Tony Garrisson, a partner at HWL Ebsworth, says franchise agreements vary enormously but a well drafted agreement will deal with the unlikely event of the death of the franchisee and its ramifications.
Most franchise agreements deal with death. The franchisor will always have the ability to approve the franchisee. If the franchisee is a company the constitution will regulate what happens to the shares if a shareholder dies. The franchise agreement will regulate such a change in ownership of the company.
Every time you set up a business you need to look at the situation, he says.
Take advice
The pre-purchase planning is two-fold, Steinmetz says. Structure the business to suit your plans before you start up your franchise, and then write an appropriate will that takes the business into consideration.
We’re not 10 feet tall and bulletproof even though we all like to think we are, he says. Getting the best advice you can will ease the situation for family, friends or partners left behind in the case of death, he says.
For more information about making a will, visit www.goodwillweek.com.au or call 1300 14 24 34.