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Busy (And Stressful) Weeks

These past 3 weeks has been very busy weeks for me. After my dad passed away few months ago, our family has decided to hand over the operation of a family business to a distant relative. After months of planning and negotiation, as well as liaising with banks, government office, and principal of the business, we have finally completed the handover 3 days ago.

Here are some lessons learned from the whole process:

1. Business Structure: Sole Proprietorship vs Limited Liability Company
   There are lots of advantages of Limited Liability Company/LLC (also called Private Limited, Perseroan Terbatas, or Sendirian Berhad in different countries) over sole proprietorship business. But in this case, I would just highlight one of them. If only our business was a limited liability, most of the headache would have been avoided. We will just need to hand over the shares of the company, and appoint new director.

2. Business Valuation
   As our business is a small business, valuations is quite straight forward. We cleared debts from bank, and we clear all the trade payable before proceeding with the final stage of the handover. The assets are also quite easily accountable: the only major assets are building, vehicles, inventories, and trade receivables. We value the business at
   Assets + 2 Years Profit
3. Transfer of Manpower
   Undang-Undang Tenaga Kerja (Manpower Law) in Indonesia is not very friendly to businesses compared than, say, Singapore. Careful planning need to be done to avoid problems in the future while at the same time balancing the needs of workers and new owner. We make sure each workers are well informed of their rights and choices, and to make a written statement regarding their own decision.

4. Taxation
   Tax planning to minimize the amount of tax payable is essential. There are GST – Government Service Tax / Goods & Service Tax (called PPN – Pajak Pertambahan Nilai in Indonesia, VAT – Value Added Tax in UK) as well as Income Tax (PPh – Pajak Penghasilan) that need to be considered.

5. Licensing
   We need also to ensure that all licenses needed for the business operation remain intact, whether it is from government bodies or from other companies. In our case, it was the sole distribution right from our business principal/supplier. As the distribution right is not transferable, we work around by retaining part ownership of the business.

Disclaimer: I’m not a professional in this regard. Please contact qualified professional (attorneys, tax planners, business valuer, etc) before you take any action based on this article.