Selling your business: the impact on your family

A business sale may impact the career plans of family members, as well as requiring changes to your estate planning.

Selling a business is usually a time for celebration, but it’s also likely to be a time of significant change for you and your family. George Maltby, Portfolio Director at Cazenove Capital, has worked with many business owners who have been through the process.

In his experience, business owners are often most concerned with the question of whether they have sold the company to the right partner. They also want to make sure that the sale proceeds will support their family’s lifestyle.

Business owners may also want reassurance that the sale is not going to harm their family life.

“Coming into life-changing amounts of money does not just throw the entrepreneur into the spotlight, but potentially also their family and children,”
— George Maltby

We always advise clients to discuss exit plans with their family as early as possible. It’s crucial when family members work for the company or may have been expecting to join in the future.

Passing it on

The crystallisation of wealth through a business exit brings new goals and responsibilities. One area where clients may need to review their plans in the run-up to a business exit is inheritance.

“Thinking about this early on allows for more effective tax and succession planning,”
— George Maltby

Business assets in the UK currently benefit from Business Relief, allowing them to be passed on free from inheritance tax. However, a sale of the business for cash does jeopardise this. Careful planning can help in this scenario.

The sale of a business may also require you to change your plans for the division of assets between members of the next generation. An exit may create more scope to divide assets equally, but it could also disappoint individuals who had been expecting to take over leadership of a business.

In one case, we worked with a business owner who had agreed to sell his company for a nine-figure sum. However, he pulled the plug on the deal in its final stages because he did not want to deprive his eldest son of the opportunities he had in the company.

“Our client’s son had worked in the business for over 20 years and it was his passion,”
— George Maltby

It’s a good example of just how important it is to understand family dynamics and the aspirations of different family members before starting a sale process.

“The process itself can be a highly pressured and emotional time…and that’s not usually the best time to start a difficult conversation,”
— George Maltby

Despite the challenges, selling a business can come with huge benefits for the family, and beyond. It can provide the flexibility and financial freedom to explore new passions and pursuits. In many cases, it has also allowed families to donate large sums to charity and use their resources and expertise to help others.

Find out more about our Business Exit Planning services.

Please note: This article was written before the Government's October 2024 budget review announcements. Readers should always obtain independent tax advice relevant to their personal circumstances.

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