When we think of estate planning, we normally think about the assets that we will leave behind for our children and grandchildren upon our deaths. Yet estate planning also includes all plans for retirement, and what you are going to do with your business when you decide it is time to stop working. Most business owners forget to plan for the future of their business once they leave until later in their years. By getting a head start and understanding business planning in the modern era, you may be able to preserve your company for years to come and see the fruits of your legacy long into the future.
Sometimes, your retirement will come when you choose to stop laboring and take leave of the company. Other times, you may be forced into retirement because of an illness, or you may even die and leave your business behind. That is why it is never too early to start planning for the future of the company that you work for. If you die and still have technical possession of a company, then it will be included in your estate and could even be subject to state taxes. In some cases, families are forced to sell a business they can’t operate at a “fire sale” price. This can be sobering, because it means that the government will reap the benefits of your company, rather than your family.
When you are planning your business exit, you need to consider the demographics of the age. At present, baby boomers are starting to sell their businesses, and there are about two to three sellers for every qualified buyer. This makes competition fierce, and causes business owners to drop their prices drastically to make a sale. When making these sales, modern business owners need to carefully abide by all regulations. Investment banks, insurance companies, broker-dealers, and valuators all may put rules on your sale that you will need to abide by. In this economy, some businesses fail. Be prepared for this possibility when selling company, because it is often difficult to start up a new company or keeping a slipping company moving in tough financial times.
You will also want to consider the corporate finance environment and the taxation environment when you are considering the future of your business. At present, outside financing is difficult. A buyer may have to provide 40 percent cash, 40 percent from lenders and 20 percent to be paid over time. There is less available from lenders at present, which can make selling or prolonging a business complicated. As well, taxation on business owners is increasing, which may cause barriers when it comes to running or selling your business.
With all of these factors standing in the way, how can you prepare a smooth business exit? Thankfully, with some careful planning you may be able to achieve your goal. First of all, you should attempt to cut taxes and expenses. You should also evaluate your management and employees at the business and carefully make sure that you have people in positions that can do their jobs well. As well, you will want to hold a meeting with all executives and explain your goals and desires for the company after your passing or retirement.
Be realistic about the value of your company if you choose to sell, because you may not be able to obtain the value that you would have preferred. As well, you will want to be realistic about your role after your transfer the business onto someone else. Chances are that the new owner will want to do things slightly different from you, and you will want to be gracious with him or her. Often it is best to transfer the business to a family member or a reliable employee. You will want to meet with the benefactor beforehand to confirm that he or she is willing to take on the business before officiating the transfer on paper.
If you have more questions about business transfers and how the economy and government will affect the future of your company, then talk to a probate attorney today! You will want experienced advisors on your side to help you make this transfer wisely. Without a team of legal and financial aids, you may make mistakes that could cost you dearly. After you are equipped with professional help, you should get started on your exit plan right away. Procrastinating could prove detrimental to your business transfer.