For many years, you’ve been the captain of your ship. Running your own business hasn’t been easy, and success was never guaranteed. Now that you’re getting closer to retirement, you’ll have to make some big decisions. In order for your business to outlive you, you’ll need to map out a path forward. This means setting up a succession plan for your business. Here’s a preliminary checklist to get you started.
- Identify Your Successors
Name both managers and owners of the business, and codify their roles in writing, active or non-active, for all family members. And, if there’s additional support required for the successor from family members, then be sure to include that as well.
- State their Roles and Responsibilities
This is where the governance processes will be created in terms of how family members are included. You may want to create a method for resolving disputes if needed. You’ll also want to list out the roles and their responsibilities. Developing a vision and outlining goals and objectives for the future with everyone on the same page is key. You want the next generation of management to closely align with business goals, as well as have a better understanding of their personal wishes.
- Create a timeline
Write down at least a general timeline of when transitions will begin. If the business is going to be purchased, the purchaser may need to look into financing options, either from an external party or self-financed on a deferred payout basis from the retiring owner. Think about when you want to retire and start as early as a few years before, as this process can take longer than you might expect. You may also opt to slowly transition out of your leadership role to give your successor ample opportunity to transition into their role.
- Understand How the Sale of Your Business Will Be Taxed
A business usually has many assets, all of which must be classified into categories (capital assets, depreciable property, inventory, etc.) when a business is sold. Individual assets will be treated as if they are being sold separately. Be aware that claiming personal expenses also used for business may or may not cause a problem if you’re audited or when it comes time to sell. This is why it’s important to plan ahead and work with a professional who can guide you through the somewhat ambiguous rules.
We can help you map out your unique retirement plan and consider all of the elements that will go into it, from helping you with valuating your business to passing the torch to a new owner. Schedule a time to meet with us so we can learn about your unique situation, business, and retirement goals.