Key Considerations For Life After The Family Business Exit

As the ‘baby boomer’ generation reaches retirement age, a growing number of family business owners are considering an exit. In fact, research suggests that almost a third of SME owners are planning to sell all or part of their business within the next two years.

However, when it comes to preparing for life after the family business, owners must begin planning long before the ink is dry on the deal. Here Jane Ingleby, partner, (family), and Ellie Milner, partner (private client), at national law firm Mills & Reeve, outline the essential steps owners should take to ensure a business exit benefits their family for generations to come.

Planning Early Is Crucial

The first key piece of advice we give to any family business owner contemplating sale in the near future is to start planning as early as possible.

Ideally this should start two years or more prior to the deal being done, to allow time to maximise planning within the requirements of the specific tax legislation. Compounding the pressure, from April 2026 the rules are set to tighten further still, with 100% Business Relief (BR) availability plummeting to £1m per person, and relief halved beyond that threshold.

Completing a sale before April 2026 also locks in the current 14% rate of Capital Gains Tax on the first £1m of proceeds, under Business Asset Disposal Relief rules, with these rates expected to rise to 18% thereafter.

Another reason for early planning is to maximise the attractiveness of a business to prospective buyers. Family businesses often operate on generations of trust and tradition and, in turn, can lack critical formal governance.

Buyers, understandably, demand documented rigour and clarity. Preparing well in advance and working with experts can pay dividends in transforming informal operational habits and processes – the "how we’ve always done it" – into a sale-ready structure, directly boosting the purchase price.

Key Considerations For Post-Sale Life

Families rarely pause to consider how sudden, substantial wealth will impact their dynamics – but it’s vital to do so around the sale of a business. Key areas for consideration both before and after the money from a deal hits the bank include:

• Wills and Lasting Powers of Attorney (LPA): Life’s uncertainties don’t respect deal timelines and outdated wills can trigger chaos. It’s important to act as soon as possible by drafting flexible wills that cover as many eventualities as possible. Simultaneously, updating Lasting Powers of Attorney (LPAs) is non-negotiable. Without LPAs, sudden incapacity could freeze deal-critical decisions, invite costly court battles and create bitter family disputes.

• Wealth distribution: The influx of post-sale wealth needs intelligent channelling. In practice, families often blend the use of outright gifting, trusts and Family Investment Companies.

  Outright gifts offer simplicity and leverage inheritance tax allowances but provide no asset protection against future divorce claims or creditors.

  Trusts offer more asset shielding , but can involve a loss of direct control. There are also considerations to make between the use of bare trusts (where the beneficiary has rights to all capital after the turn 18) and discretionary trusts (where trustees have more decision-making power).

  Family Investment Companies are essentially private limited companies used specifically for family estate planning and allow for bespoke structuring to fit specific family circumstances.

• Guarding wealth: Legacies can unravel through errors such as intermingling supposedly ‘protected’ capital with marital assets.

  The golden rule is to maintain segregated accounts for protected assets. Using distributions from a protective trust or FIC to buy jointly held assets (for example holiday homes) can instantly convert ‘ringfenced’ wealth into divisible marital property. It’s therefore crucial to never fund joint purchases with trust or FIC capital without explicit, legally documented agreements. Clear, meticulous records are essential.

  Similarly, robust prenuptial or updated postnuptial agreements are essential for inheriting adult children. These should be reviewed immediately after the exit – new wealth demands new terms.

• Purposeful philanthropy: The sale of a family-business frequently spurs on charitable desires, but there are a range of considerations to make in terms of exercising this goodwill in the most effective way. There are a range of options available, from direct donations to the establishment of a new, formal charity. Which option is most suitable will likely depend on amounts being donated, along with short and long term philanthropic aims and ambitions.

The legal and financial groundwork for the sale of a family business should begin early – not when the buyer’s letter of intent arrives. By the time you are celebrating the sale, the real work of preserving family harmony and securing the legacy for generations should already be complete.