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Success in Succession Planning

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Success in Succession Planning

  1. 1. Succession planning Protecting your business and equity for the future PROFESSIONAL ADVICE | PERSONAL SERVICE | GENUINE INTEREST
  2. 2. Something to think about If you, or one of your business partners had died yesterday, what does your business’ future look like? Buy/Sell (or Equity) Insurance is about planning for the life of your business after your death, or the death of one of your partners. It is also about making sure that the most important people in your life get the benefit of an important asset. What is a buy/sell agreement? A Buy/Sell agreement is an agreement that enables the purchase of a partner’s shares in the occurrence of a defined trigger event. The purchase can be funded personally or via the business, however it is more commonly done so via the use of insurance. This can be more cost effective and provides access to ready capital. Is it really necessary? If there are two partners in your business, the chances of one not making it to age 65 is 19%. Suffering death or total and permanent disability is a 35% chance. Alarmingly, there is a 55% probability of one partner either dying, suffering from total and permanent disability or having a trauma event before age 65. The more partners the higher to odds of something happening to at least one. No of partners Death Death or TPD Death or TPD or Trauma 2 19% 35% 55% 3 27% 47% 70% 4 35% 58% 80% 5 41% 66% 87% Based on a 45 year old male. Probability of death based on Australian Life Tables 2003-2005. Probability of Total and Permanent Disability and Trauma based on MLC experience. How it works Agreement The partners sign an agreement enabling the purchase and sale on certain trigger events. Funding mechanism Each partner has an insurance policy on his or her life. Beneficiaries The beneficiary of the policy is the partner’s estate. Precedent The Agreement stipulates that the funds received for the insurance policy are for the payment of the partner’s shares in the business Win-win The estate receives the payment and remaining partners receive the shares. I have been working closely with Stewart over the past three years, putting together a strategy to restructure my various Super funds and also secure advice with regard to our family business. I have found Stewart to be extremely helpful in not only giving us excellent advice, but also the fact that he has the ability to go through the strategy and explain everything in layman’s terms. We recently sold our family business and were fortunate to be in a position to show a reasonably solid capital gain. Stewart prepared a strategy in conjunction with our accountant to ensure we paid no Capital Gains Tax. Needless to say we were delighted with this outcome. Steve Cairns
  3. 3. Success in succession planning What you should think about, when thinking about succession planning: Client Adviser Project Management Strategic Business Planning Estate Planning & Distribution Strategy Counselling Personal Insurance Asset Protection Business Insurance Tax Planning Super Planning I have been receiving investment advice from Stewart Hynes for the past 5 years. Initially he helped me with planning for my retirement but more recently he has counselled me about ways to go about selling my small business. We had many open discussions about whether to sell the business or employ people to run it for me. Stewart listened to what I was saying and then offered sound advice, bearing in mind what my personal preferences were. He gave me “food for thought” as well as giving me some contacts whom he thought may help me. Stewart is a great communicator and in conjunction with my accountant his advice regarding Capital Gains Tax and how to put a price on the business was invaluable. He gave me confidence to follow through and successfully sell my business. I can highly recommend him. Jan Thompson
  4. 4. The information (including taxation) contained within this document does not consider your personal circumstances and is of a general nature only - unless otherwise stated. You should not act on it without first obtaining professional advice specific to your circumstances. Stewart Hynes is an Authorised Representative of RI Advice Group Pty Ltd ABN 23 001 774 125 AFSL 238429 Stewart Hynes CFP, DipFP m: 0419 301 604 e: stewart.hynes@riballarat.com.au Specialist business adviser Stewart Hynes has over 23 years’ experience in the financial services industry, joining National Bank in 1989 before moving into the financial planning space with GIO Australia in 1995. Stewart joined RetireInvest Ballarat in March 1997, becoming a Partner in 2000, after which he assumed sole control as the Managing Director following a full acquisition in December 2003. Over the next 5 years the business expanded and grew strongly until he commenced his own Succession Planning strategy, which included selling down equity and taking on a business partner. After taking the opportunity to acquire another financial planning business in St Kilda Road, Melbourne he managed this business until it was merged in 2008 and was successfully sold in December 2011. During the 2011/2012 financial year Stewart took an extended break away from the business whilst deciding where he would devote his energy. RetireInvest | RI Advice Ballarat 200 Sturt Street, Ballarat VIC 3350 t: 03 5333 4950 f: 03 5332 6774 www.riadvice.com.au With a strong passion and desire to help other small business owners realise their dreams and establish a work/life balance they deserve, he now works exclusively with business owners to make sure this happens. Stewart holds the internationally recognised Certified Financial Planner (CFP® ) status along with a Diploma in Financial Planning. Our services Business succession planning Shareholder/Partnership Agreements Buy/Sell Agreements - Insurance Funding Solutions Keyman Revenue/Capital Protection Finance and Mortgage Broking Investment advice Superannuation advice, including SMSF Investment Strategies Debt Management Ongoing Investment Advice Retirement Planning During the past four or more years I have worked with Stewart consistently in my transition to retirement – of which I am currently in semi- retirement mode. The process has been involved but Stewart’s expertise, in conjunction with my accoutant, in arranging and overseeing the sale of the equity of my business, addressing capital gains issues, taxation related matters, relationship planning including financial agreements and will; it has been an easy transition to the stage I am now at. Our final objective is still ongoing and I am extremely confident that working with Stewart, both up to my retirement and beyond, all of my financial requirements will be set securely in place. Jeff Lillingston

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