You’ve worked hard, put in long hours, effort, thought and passion, and resources, to build your business. Whether life has calmed down and you’re able to enjoy some free time, or you are still deeply immersed in day to day operations, planning for the time you may no longer be around should take a place on your to-do list.
People who work in small business assistance centers are reporting an increased surge in requests to help plan the next phase of a business. Many small business owners have labored under the assumption that one day, their hard work, reputation, and product will pay off when someone wants to purchase that, allowing them to retire comfortably.
But the economic conditions we are in are often prohibitive for prospective business owners to be able to finance the purchase of an already existing business. What can the business owner do?
In Entrepreneur magazine, J.D. Roth tells the story of his father’s decision for passing on his business.
While Roth’s experience included the emotion of struggling through a terminal illness with his father, he was also able to distill some valuable advice:
“Start early. Planning now affords you more options, especially when it comes to mitigating tax liability. The earlier you start transferring ownership to your children, the smaller the estate tax bill will be after you die. Early action also allows you time to correct your course (if, for example, your daughter realizes she has no interest in the business, or the IRS changes a tax policy).
Be objective. Face it: What's best for your family is not always what's best for your business. Determine what your business requires to survive and grow, and be prepared to admit, possibly painfully, that your spouse or children may not be up to the task.
Seek help. Consult your accountant and attorney about reducing your family's tax obligations and avoiding possible legal complications between partners and family.
Consider the staff. Your plan should address the vested interests of company officers and loyal employees; overlooking their contributions and value to the business could backfire. Don't risk the bad karma--or the possibility that they could leave and take your best customers with them.”
Roth further gives his experience’s key point about communicating:
“Communicate clearly. In the months before he died, my father pulled me aside several times to explain his choices. He knew that I didn't agree with everything he was doing. However, by being open and direct, he helped me understand his reasoning.”
As with any major step you are taking in your business, planning is key. The future depends on it.
Content contributed by Maria Brown, SoMNSourceLink. SoMNSourceLink is a proud affiliate ofU.S.SourceLink, America’s largest resource network for entrepreneurs.