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Succession planning tips for SMEs in Switzerland

Wealth & Pension Planning
14.04.2023 by Daniel Schädler Reading time: 3 minute(s)
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Daniel Schädler

Senior Financial Planner

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Zwei Generationen einer Schreinerfamilie: Die Nachfolgeplanung im Unternehmen stellt viele KMU vor grosse Herausforderungen

The boundaries between business and personal life are often blurred for business owners. The value of one’s business often accounts for a significant portion of personal assets. And entrepreneurial developments have a corresponding impact on personal finances and retirement planning. Professional succession planning has the advantage of balancing these dependencies at an early stage. This is how you can successfully pass on added value twice: to your successor in the company and to yourself for retirement planning.

Are you ready to start the next chapter for your company?

“What is good for the company? What is good for me?” In practice, the two perspectives cannot always be easily separated. Nevertheless, being aware of the role in which you make each decision is essential—whether as a business owner or as an individual. Given that this process is far from easy, we have specialized in providing holistic advice to families who run their own businesses, from company pensions to succession planning.

  

The “time” factor in company succession planning

A change of ownership can trigger a number of changes both within the company and also in your personal life. How do you prepare a company for sale while not thereby generating tax or financial burdens for either you or your successor? To bypass any avoidable downsides, succession planning must be treated as a dynamic process. The earlier you start, the greater the flexibility.

  

Seven-point checklist for business owners

  • Legal form: Restructuring from a sole proprietorship to a stock corporation or a limited liability company can offer advantages. But it is time-consuming. Especially when it comes to taxes, holding periods must be observed before a sale.
  • Balance sheet: Any financial resources in the company that are not required for operations can weigh down the balance sheet unnecessarily. These can include real estate, investments, or excess cash. They can complicate the sale of the company and should be removed well in advance. Taking action early also provides opportunities for tax optimization.
  • Price: Selling your own company is often a deeply personal matter. Its emotional value cannot always be quantified in monetary terms. Furthermore, there is no objective “correct value” for a company. Numerous factors can influence its worth, including industry, current market conditions, financial markets, the company itself, and the chosen successor, to name just a few. If the company is transferred within the family or to existing employees, the sale price can generally be lower than if an external solution is sought. Either way, a market-based business valuation provides a solid foundation for price negotiations.
  • Retirement planning: What is your overall financial situation, including your retirement funds? Are you aiming for as large of a profit as possible from the sale of your business to boost your retirement savings?
  • Taxes: What direct and indirect taxes will you have to pay? What taxes will the business and your successor(s) have to pay? Those who are not under time pressure can optimize the tax effects of a sale, for example, by streamlining the balance sheet (see above) in a timely manner.
  • Timing: You cannot expect to find a suitable successor overnight. By when do you want to withdraw from the business at the latest? What should their background ideally be? Do you prefer a family member, current employee, or someone from the outside?
  • Transition period: Do you and your successor share the belief that there is nothing more valuable than experience? Then you probably want to stay in the company for the first few months or years and provide advice.

From all these points, you can put together reliable facts for decision-making if you involve the relevant experts at an early stage. We will be happy to put you in touch with our financial planners, tax experts or estate planners.

  

APROPOS

Swiss succession planning in figures

  • In 2022, 93,009 registered companies in the commercial register were looking for a successor.
  • Around 45 per cent of companies are transferred within the family, 30 per cent to employees, and around 25 per cent to third parties.
  • The chance of continued existence is around 95 per cent for acquired companies, while for new startups, it is only around 50 per cent.

Source: KMU-Portal SECO

  

Our services for business owners and SMEs

  • Financial planning

    For sellers of a company, having an overall view of their financial situation is vital. For example, are you aiming for the highest possible sale price to boost your retirement savings? Then aligning the sale with your retirement assets is worthwhile. Our experts will be happy to advise you.

  • Tax advice in day-to-day business

    As a business owner, you can generally choose whether to pay yourself the profit of your company through dividends or to give yourself a raise. Both options have their advantages and disadvantages in terms of taxes and retirement planning. Our experts will assist you in making the best decision for your personal situation.

  • Tax advice on the sale

    The sale of a company can bring in a large sum of money in one swoop. We provide comprehensive tax advice to self-employed individuals and SMEs regarding the sale of their businesses. Anyone who is not familiar with the tax jungle can quickly fall into a tax trap. Experience shows that not all taxpayers can catch up with the “knowledge advantage” of the tax authorities in direct contact with them. Our experienced tax experts negotiate all Swiss tax issues on equal terms with the authorities and, where necessary, obtain binding tax rulings.

  • Estate planning

    The protection of a spouse or partner in the event of death, as well as regulations for incapacity in areas such as personal care, asset management, and representation in legal transactions, are crucial. Family businesses also present unique challenges for heirs of a deceased entrepreneur in terms of taking over the business. The revised inheritance law, which came into effect on January 1, 2023, has already taken steps to facilitate family-internal business succession by reducing compulsory shares for descendants. This will be further expanded in a future revision stage.

  

  

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