As a business owner, it is crucial that you make plans for how you will pass on your business. After all, business succession planning will ensure that your work carries on even after you are no longer the head of the company.
You have plenty of options available when deciding what to do with your business. Understanding the pros and cons of each one will help you make an informed decision.
Consider your retirement
Business.com lists things to consider when the time comes to leave your business. First, you need to consider whether or not you should leave the business entirely. This is mainly for retirement purposes. As a retiree, you have no source of income. Many older adults live off of retirement plans, savings or pensions. But as someone who owns a business, you likely live off the business itself. If you have no retirement plan in place, you may want to stay on board as a paid advisor or an investor.
Gifting vs. selling
Next, you need to decide if you want to sell or gift your business. If you have a family member to pass your business down to, you can choose to gift it rather than sell it. Just beware that you might run into a gift tax, depending on the net worth of the company. You can also choose to gift part or all of the business. If you only do part, you may still hold responsibility for some of the taxes.
Another option is selling. You can sell a business to a relative, to a key employee, a business partner or even an outside buyer. Just know you will likely not get a lump sum for the purchase. You can also choose to sell part of your business or the entire thing. As with all business decisions, it boils down to what you feel will be most beneficial.