November 01, 2013 - Rachel Miller
Almost half of British SME owners plan to pass their business on to their children and 13% intend to pass it on to their spouse, according to new research conducted by Close Brothers Asset Management.
The survey of 837 employers found that 63% of SME owners aim to pass their business on to a family member when they retire, with 48% intending to hand the business down to their children.
In addition, the poll found that 13% haven't thought about succession planning at all, and 45% of SME business owners don't have plans in place to extract profit from their business when they retire.
Patrick Haines, regional head of advice at Close Brothers Asset Management, said: "SMEs are the building blocks of the economy and their longevity is crucial. Many are already multi-generation family businesses, but whether a company is newly formed, or centuries old, it's encouraging that the majority of SME owners plan to protect their business and its heritage, preparing children or family members to take over at the helm."
He added: "We already know that only a third of family businesses make it to the second generation and succession can be a complicated process. There are tax implications of passing businesses to the next generation that business owners need to be aware of."
The Close Brothers research revealed that 45% of small business owners don't have plans in place to cope with the tax implications of extracting profit from their business when they retire. And 8% had no understanding at all of the tax implications of taking profit from the business.
Lack of tax planning is more acute in smaller firms. For those businesses with a turnover of between £750k and £1m, the majority of owners admit to not having put any plans in place (52%). In comparison, 83% of owners of businesses with a turnover or £5m or more fully understand the tax implications.