Built To Last: The Family Business Playbook With ADLV Law
Dushawn Jovic
In partnership with ADLV Law
Trusted South Australian law firm ADLV Law breaks down the underlying principles that contribute to a long and successful business
Having worked closely with family business owners and entrepreneurs for over 25 years, ADLV Law has seen the inner workings of several iconic and long-lasting South Australian family businesses and identified three fundamental areas leading to success: Asset Protection, Governance and Estate Planning and Succession. This has prompted ADLV Law to assist family business clients to develop their own family business playbook – a bespoke approach to growing and maintaining family business success, with a view to stewardship and longevity.
Here are ADLV Law’s top tips on how you can develop your own family business playbook.
ASSET PROTECTION
Protecting assets for the long term keeps family businesses resilient. But before you can think about protecting assets, you need to know two things: What do you own, and how do you own it?
Many business owners struggle to answer this question, not through any fault of their own. Often, solutions and strategies to solve an immediate problem have been put in place, which could mean you find yourself facing a “structure diagram” that looks more like a web than a sensible map.
Seek professional advice and conduct a thorough review. A well-seasoned advisor will be able to confirm exactly what you own and how, while also recommending strategies to achieve more robust asset protection.
Playbook tip #1: Know what you own and how. Protect it now and preserve it for future generations.
GOVERNANCE
Once you know what you own, ask yourself – who controls it?
For companies, understanding core principles of corporate governance is essential. Know who your directors and shareholders are and understand their different roles and responsibilities. Directorship carries the risk of potential personal liability, so think about limiting the number of asset-holding family members that get involved at this level.
Family trusts offer maximum privacy, tax flexibility and asset protection, which is especially valuable to family businesses. Who has control of family trusts can be complex, particularly across generations. If you utilise trusts in your family business, understanding where control sits will be critical to developing a strategic control plan for the future.
Playbook tip #2: Get your head around control and governance of your family business and use it to your advantage.
ESTATE PLANNING AND SUCCESSION
Now that you know what you own and how you own it, what’s your plan for the future? Many family businesses dream of carrying on for multiple generations. If this is your goal, a plan and clarity of expectations between the incumbent and the next generation are key to ensuring smooth succession.
If there is a lack of family interest in continuing the legacy, many family businesses look at selling to key employees, employee share schemes or private equity investment or acquisitions. Addressing these questions early will help gear you up for success in the future.
Personal estate planning deals with personal assets, and business succession planning addresses the transition of control of business-related entities. There can be a cross-over here (for example, personally held assets that are utilised by the business), so seeking professional advice from an expert in this area will set you up for success.
Don’t forget to consider the scenario of the controller’s incapacity, where someone else will need to be formally appointed to step in and steer the ship.
If you don’t take the time to develop a clear plan, it can be very difficult and expensive for the next generation to make your vision a reality after the fact. This is also when disputes can rear their ugly heads. Planning can save the next generation headaches and heartache.
Playbook tip #3: Succession planning doesn’t happen overnight. Planning two, five or ten years in advance can pay dividends when the transition of control is successful and stress-free.
THE BOTTOM LINE
Every family business is unique, so the playbook you develop for yours needs to be tailored to your family business goals and vision.
With two Family Business Association accredited advisors in the team and years of experience backing us, ADLV Law has worked with hundreds of business owners to develop their very own family business playbook. When it’s all done, we love to sit back and cheer on your success.
Mention this article to speak with a lawyer at ADLV Law on a no-obligation basis about how they can help you move forward with confidence.
ADLV Law is located at Level 21/91 King William Street, Adelaide. For more details, visit adlvlaw.com.au or contact ADLV Law at 1300 654 590 or wehelp@adlvlaw.com.au.
