Why is Business Succession Planning Vital for Your Company?

This article is aimed at small and medium-sized businesses operating in emerging economies, where often the shareholders and directors are not nationals of the country where their business is resident.

Entrepreneurs often start a business in another country for a multitude of different reasons and will begin trading, or open in multiple markets, to pursue opportunities.

Revenue drives business and often issues like succession planning are left until it is too late and a key person dies, or partners split, even causing the business to collapse or maybe suffer a significant set-back.

These types of businesses may also require complex banking arrangements, especially if they are trading in different currencies. In some emerging economies, moving money from one country to another can still be complex and rather expensive.

For some businesses, which have income coming in from multiple suppliers and where the income comes from an area outside the country where the main office is based, this can create opportunities. It may also be worth considering setting up an offshore company, with offshore bank accounts, which can receive money from foreign partners.

The use of an ‘offshore company’ can potentially create tax-saving opportunities in certain parts of the world. It may also be worthwhile setting up an offshore company, so that it owns the ‘onshore company’. This may be an opportunity to create ‘business succession planning’ by this strategy. With an ‘offshore company’ in many jurisdictions, it is possible, if one shareholder dies, for assets to pass to surviving shareholders quickly and efficiently and avoid estate duties and other taxes.

There are many countries in the world now which specialise in offshore companies and trust structures for companies and individuals. These structures have proved robust over time and offer great business succession opportunities for many businesses. These jurisdictions are often, either ‘tax free,’ or offer a very low tax base for companies wanting to list in these jurisdictions.