As a business owner, you face a unique set of issues. In most cases, the majority of your net worth and your entire income stream may be tied to your company. After working so hard to build your business and as you approach retirement age, you may ask the question – now that I am ready to retire, what am I going to do with the company?
I’m Ready to Retire – What Should I Do with My Company?
It’s important to identify the financial and personal implications of changing the ownership of your business. As part of the process, examine your contingency planning. While a portion of the contingency plan may involve insurance that you already own, planning for the business should be much more involved than providing funds for the family and the business in the event of the untimely death or disability of the owner. Consider creating a plan for how the business will survive and continue, how your family will be taken care of, and who are the best people to move the business forward when you are no longer in charge.
Planning for Business After You Retire
Next, formulate a transition plan for the eventual change in ownership to help you re-define your relationship with your business. In doing so, look at both the short and long term of how you and your company will evolve through the change in control.
This transition may generally involve one or more of four choices:
- Sell or give your business to a family member.
- Sell your business to your management team or key employees.
- Retain ownership in your business and allow your management team to run the day-to-day operations.
- Sell to a third party.
Formulate a Business Transition Plan
Every business owner must eventually confront a business transition, as the ownership in your business will change at some point, either voluntarily or involuntarily. Transition planning for this instance is just as critical as understanding the implications of the transfer. If the transition is not managed properly, your business interest and the value that you want to preserve for yourself and/or transfer to your family could be at stake. The goal is to provide you with the right information so that you can make the best decision for the best interest of all involved parties.
Proper Planning of a Business Transition
As you delve into a business transition, there are multiple components of proper business transition planning to consider. Though detailed, being prepared in the following areas will help to ensure for a smooth business transition.
- Long-term business goals
- Business succession issues
- Family dynamics and ownership issues
- Diversifying your asset base
- Estate planning
- Risk management
- Establishing family limited partnerships
- Establishing entities
- Tax strategies
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice.
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