Succession Planning Considerations for Small Business Owners

RetirementYou may not be quite ready to retire from your company, or you may be on the cusp of leaving it all behind.

Either way, now is the time to be thinking about your exit, or succession, plan from your company. After all, it could be the single most important financial event of your life.

Transitioning your business is not a “one-size-fits-all” process. Each business is unique. Therefore, it’s important to explore the options and variety of possible outcomes.

Why Preparation is Important

Whatever the reason for closing the business—retirement, career change, selling—transitioning your business takes time, planning, and forward thinking. Here are some points to consider before making the change.

  • What are your personal and professional goals?
  • When do you want to sell or close the business?
  • Have you identified a buyer, or will you be passing it down to your children, spouse, or other family member?
  • Will you gain enough money from the sale to fund your retirement?

The Plan

There are several ways to transition a business; but, all begin with a foundational process, including:

  1. Defining your personal and professional long-term goals.
  2. Identifying your long-term financial requirements and the approach to achieving them.
  3. Creating and developing a management team.
  4. Selecting a new business owner; and, how to transfer your interest to him/her.
  5. Preparing your estate plan to minimize tax implications.

The Options

When you’ve decided to transition your business, there are several options to consider. Identifying which strategy to use should be based on your personal goals and individual circumstances.

Key Challenges

There is no gain without some pain, and selling or closing your business is no different. There are several key challenges to consider as you move through this process, including:

  • How do you maintain your lifestyle and financial security without the business income?
  • Is the person identified as the buyer, the best person to take the company forward?
  • Defining the transactional details, including how and when you will be paid for the exchange.
  • Minimizing risks associated with the transaction.
  • Minimalizing estate and/or income taxes associated with the transaction and future income.

Don’t Go It Alone

Selling your business could be the most important financial event in your life. The better prepared you are and the earlier you begin planning, the better off you’ll be.

Start now. Work with a, experienced financial advisor and legal counsel to help guide you through the process. Download the Succession Planning Process Timeline to help you get started.


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