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Effective succession planning for business

Succession planning reduces uncertainty, can provide for your family, and gives you and your business partners peace of mind.

Hope for the best, plan for the worst.

This quote applies to so many situations, but it’s especially true when it comes to succession planning strategies for business owners. When you’ve put your heart and soul into a business to make it a success, you won’t want it to go under if something happens to you.

That’s why it’s important to have a succession plan.

It can set out your wishes and requirements if there’s a significant event that affects your ability to run your business.

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Why should I have a succession plan?

It’s no secret that life is uncertain: out-of-the-blue events happen all the time.

And business operators certainly aren’t immune; that’s why succession planning is necessary. A succession plan sets out what is to happen to your business if you’re unable to run it due to trigger events that can include:

  • Death
  • Serious illness
  • Retirement
  • Disability, including total and permanent disability
  • A serious business dispute
  • An agreement coming to an end (for example, a franchise agreement or partnership agreement)

A good succession plan will take into account all these events and provide directions for each. A succession planning lawyer should draft the documents so that they’re reliable.

We’re known for our effective succession planning processes, and we can help you.

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Succession planning for partnerships

Having a partnership agreement is a great way to protect your business.

If you’re in a business partnership, you’ll need an agreement that sets out how each partner can leave. The agreement should contemplate a range of different scenarios, including the death of a partner.

People working at a table

If a partner dies, the agreement may allow for:

  • The partner’s estate to acquire their share of the partnership
  • The partner’s share to be transferred to the surviving partner or partners
  • The surviving partner or partners having an option to buy that share of the partnership from the deceased’s estate

Often, business partners can insure against unforeseeable events such as the death of a partner.

This may give them a payout with which to buy a partnership interest, without the stress of having to source the money.

If there’s no partnership agreement, the South Australian Partnership Act may apply, which dissolves the partnership immediately on the death of a partner.

 

Person holding a pen and paper

If you’re about to enter into a partnership, we can help you get the paperwork sorted.

If your partner has recently passed away or has been affected by some other trigger event, contact us as soon as possible for urgent advice.


Buy/sell agreements for businesses

Many business operators find that buy/sell agreements are valuable because they promote certainty, minimise the risk of disputes and set out the financial benefits and protections for each party.

Like partnerships, the parties to buy/sell agreements can carry insurance cover if they need to buy out a share of the business at short notice.

Regardless of the business structure, it’s possible to put in place a buy/sell agreement that sets out how your business interest is to be handled in the event of your:

These agreements may include the option to buy or sell an interest (from, or to, the other partners) and clarify all sorts of issues, for example:

  • Whether there’s a time limit on exercising the option
  • Method of valuation of the business
  • How the business assets and liabilities will be transferred
  • Whether the agreement can be terminated and in what circumstances

Why choose DBH?

We’re experts in business succession planning.

Outstanding legal team

Practical, reliable advice

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Succession planning steps

If you’re thinking about making a succession plan for your business, the first step is to contact us for an interview.

We’ll ask you for information including:

  • Your business structure and any agreements that underpin that structure
  • Your financial goals
  • Your personal obligations; for example, whether you have any dependent children to support
  • Whether your business can operate without you, and what that would involve
  • Whether the current economic climate affects the way your business operates
  • How long you think it may take to sell your business
  • Identifying the risks in changing the management of your business

We’ll use that information to tailor a legally compliant succession plan for you.


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Succession Planning team

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