Many small business owners are concentrating on the growth and profitability of their business, and are not thinking of what will happen to the business after they retire. Maybe you want to sell the business to the highest bidder or hand the reins over to your children. A business exit strategy means having a plan for unexpected events such as disability, death, or financial hardship, as well as transferring the business to family members upon retirement as part of the Estate.
Often, business succession plans fail because of family disagreements or the financial burden of estate taxes. With seven out of ten family businesses failing to survive the transition from one generation to the next, it is important to have a sound succession strategy in place. Planning a successful business succession or exit transition includes some important steps:
- Insure your worth- Protect your business and family with life insurance, disability insurance, and a retirement plan that will provide income after you leave your business.
- Develop a succession plan. A family-owned business needs to choose the right successor to carry on the business that you worked so hard to make successful. A good resource is SCORE’s recommended five steps to succession planning (including choosing and training a successor) can help in providing practical advice and direction for family-owned business succession.
- Consider the tax implications. Although a family business is generally not considered a liquid asset, taxes are due when the ownership is transferred, and the tax bite can be significant.
- Consider the family members involved and their relationship and feelings surrounding the business and its transfer. Many people are uncomfortable discussing death and family financial issues.
We can help you focus on the important issues of succession planning, including, tax considerations, business valuation, restructuring of the business, and retirement and tax projections. Our goal is to work with you to develop a well-thought out succession plan to ensure that the family business is successfully passed along from one generation to the next.
For more information, please contact us.