GUIDE: EXIT YOUR BUSINESS | STRATEGY NINE:
Maintain a Lifestyle Company
Suppose you want to continue receiving pay even after you stop working or begin phasing out the time you spend at the office. “How would I do this?”, you might ask yourself. Ideally, this would be in the form of regular paychecks, bonuses and even dividends. This is an exit strategy you could use to begin receiving money normally invested back into the business, but now solely into your bank account.
There are some drawbacks, however, to this type of strategy. Money usually re-invested back into the company helps it grow and maintain itself long term. If you start pocketing this money (legally of course), you could prevent growth when the company needs it. Additionally, if you have other investors, they may not like the idea of taking a smaller cut of profits all because you decided to exit the business while the money train continues right into your personal bank account.
If you do decide to go this route, make sure you lower your dependency on other investors (or buy them out), and organize the company in a way that would allow you to draw out money whenever you need it.
Frequently Asked Questions
Do you have questions about exiting your business? You should consider checking out our Resource Navigator. It houses the contact information of 400 of our most helpful partners from across the state who provide free to low-cost assistance to Iowa entrepreneurs and small business owners.
Q: What is a lifestyle company?
A: A lifestyle company is where you, as the business owner, use the income from the business to fund your lifestyle.
Q: Why should I maintain a lifestyle company?
A: If you aren’t too concerned about growing your business, a lifestyle company business model is probably for you. When the business does well, you can afford to pay for more things in your personal life!
Q: Are there any risks with a lifestyle company?
A: If your business model relies on obtaining new customers and innovating within your industry and into new ones, a lifestyle company business model will be hard to maintain. If you can’t keep up with the changing markets without investing into your business, then this model may not work for you (in the long run).
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NOTICE: The information included on this website is to be used only as a guide. It is not intended to cover all provisions of the law or every taxpayer's specific circumstances.
GUIDE: EXIT A BUSINESS
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