Whether you started your own business, inherited it or bought it, your company has probably been a big part of your life and your self-identity. Its successes are your successes. You may view the company as your lasting legacy for the people you love and your community.
If you’re getting close to retirement but want your company to stay open, you probably have some plans for its future. You may want to pass it on to a family member or possibly a subordinate at the business who has shown their dedication to the company.
Handling a business can be difficult for those creating an estate plan or planning for retirement. Businesses are much like real estate in that they require more consideration and preparation for a successful transfer prior to your retirement or after your death. What are the potential ways that you can pass a business on to someone else?
You can sell some or all of the ownership interest
Depending on how you hold the company and who you want to take over the company, the fairest way to pass it on to someone else might involve selling your ownership interest or a controlling portion of stock to an individual of your choosing.
Selling your business interest is often a smart move because it gives you resources to enjoy during your retirement and ensures the person taking over is invested in the company. It also allows you to facilitate the transition to new ownership, as staying on is often part of business sale contracts.
Provided that the other party wants to assume control over the company and has the resources to buy you out, this method allows you to witness their successful assumption of control over your company.
You can leave the business to family members when you die
If you intend to continue operating or at least owning the business for the rest of your life, you may choose to include it in your estate plan. You can pass it on to one child or potentially split it among multiple beneficiaries. Establishing a trust for this purpose can be beneficial, especially if the business is worth enough to trigger estate taxes.
The value of the company, your goals for its growth, your future plans for involvement and the people you want to assume control can all influence the best means of passing your business on to the next generation.