Exit Planning Strategies

You spend all these years building your business and no time preparing your exit. This is, unfortunately, more common than one might think. Business owners, oftentimes, have a hard time letting go. However, unexpected events that affect your business plans happen. It’s crucial to have a plan to exit your business so that you and the business can transition successfully.

When you start your exit strategy early, you have the opportunity to leverage discount gift giving or other income-tax reduction strategies.

Your exit strategy should include answers to the following questions:
  • How do you plan to exit? Some options include a family member(s) taking over, merger or acquisition, and selling to a 3rd party.
  • What do you want or need from the business upon exit?
  • Do you have a charitable intent? Coordinating a sizable charitable donation with the sale of your business can help with fair market value, income, and estate tax benefits, but this needs to be structured far in advance.
  • If your children are taking over the business, will they all participate equally? If not, you can equalize their inheritance through other means, such as life insurance, trusts, or other assets.

When family members will be your business successors, there are legal and tax implications to consider, as well as terms for long-term business ownership. When selling your business to a 3rd party, your focus is on the terms of the transaction and ways in which you can maximize after-tax considerations.

Develop an exit strategy for your business:
  • Determine how you want to live in retirement and the funds you need to achieve that. A financial advisor may be helpful.
  • Know your vision for the future of your company. Who will own the business? Who will run the business?
  • Decide if you want to make gifts using business interests or sales proceeds and who those will go to, family members or charities. The earlier you plan for this, the greater the maximization potential.
  • Consider tax modeling during your tax planning. A tax modeling advisor can help you maximize your tax benefits and cash flow management.
  • Be thorough with your documentation. New owners need to be able to access and understand company records and matters.
Consider your plans for 5+ years after the transfer of your business:
  • Are you planning to move to a state without income taxes? Is there an opportunity to move there prior to the business transfer in order to minimize state income taxes?
  • Do you want to continue working after the transfer? You can consider negotiating a consulting agreement or a position in some other capacity within your company or with another company, providing there is not a non-compete clause.
It is never too early to plan your exit strategy.

We are always looking to help people with the sale of their business. We offer services in a professional manner with a consultative, individualized approach. For more information or to receive a complimentary consultation, click here.

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