The COVID 19 pandemic is impacting businesses throughout the world and with the situation constantly changing, it can be a minefield knowing what you should and shouldn’t do, as well as what you legally can and can’t do.
If you’re running a family business, here are some things that you may want to consider:
Now, more than ever, it is important that you speak with all family members. These are unprecedented times and very difficult decisions might need to be made that can impact the business and family relationships.
- Should members of staff be furloughed or could this be a knee jerk reaction which will compromise the service that your customers receive?
- Should family members be on the furlough list but this is an emotive decision that you would rather avoid?
- You might be a family business that has been proud not to take on a significant amount of debt. Is this a principle that now has to change in order to safeguard the long term survival of the business?
It takes many years to build up the reputation and family business brand. Some of the decisions that are impacting the business right now can affect that reputation and all family members should be involved so that the directors of the business (whether they are the same family members or not) can act on those decisions.
Keeping two eyes on the cash flow
None of us know how long this economic uncertainty will continue and many businesses are looking for support. The Government are doing their best but certain grants will take time to end up in the business bank account. Through the CBILS scheme, there is a great opportunity to access funds quickly but a business has to be ready to access these funds.
A more flexible and timely solution could be an injection of cash in to the business by family members. There are a number of options available depending on what the business and the individual are looking to achieve. A short term injection of cash could provide much needed support until grant income comes through, with the individual being paid interest by the business which might be covered by their savings allowance. A longer term view might be taken by an individual where cash could be injected in to the business in the form of additional share capital, potentially reducing the exposure of a family member to inheritance tax in the future.
Review personal assets and liabilities
Everyone will want to look at ways to preserve the years of hard work and wealth that they have built. It is important to review personal assets and liabilities, and consider what measures can be taken to maintain savings, perhaps by deferring certain liabilities such as mortgage payments. Some may also be thinking about diversifying their investments and where commercial property is owned by a family business this might give food for thought.
It might be an option to consider acquiring all (or part) of the business property in a pension fund in order to not only provide a much needed cash injection for the business but also to provide a different form of investment that can be held personally which might also come with significant tax advantages.
Understand the risks to the business
What if a family member or key individual were to become ill or die? These are discussions none of us like to raise and it is much easier to park these conversations for another day. This dreadful pandemic does focus the mind and there are safeguards that you can put in place quickly to protect the business and family members. Whether this is a business protection policy, a life assurance plan or making a Will, all of these will help to ensure that business and home life could remain as normal as possible should the worst happen.
Family Business Connect
The above gives you an idea of areas that may be worth considering at this difficult time, which are all included within our advisory platform, Family Business Connect. With over 350 other areas that our advisers can discuss with a family business we look forward to being able to work through Family Business Connect in a structured way, depending on your own individual circumstances.
At PKF Francis Clark, we have a wealth of experience, having worked with family businesses of all sizes for many years. We look forward to hearing from you.