Is it Time to Sell Your Business and Retire?

Is it Time to Sell Your Business and Retire?

If you are like many small business owners, selling your business goes hand in hand with planning for retirementFor some selling their business and using the proceeds to retire comfortably is their only retirement plan. Even among business owners who have funded a traditional retirement savings plan, the majority of their personal wealth remains tied up in their business. 

There are multiple factors to take into consideration when you’re ready to sell your business and retire. These include the age of your business, the value of your tangible and intangible business assets, and how to find a buyer. What is the market demand for this type of business? What industry trends are currently impacting the business? How does your business compare to recently sold businesses in the same industry? 

Ideally, achieving the right price at the right time — when you’re ready to retire — is the best scenario for any business owner. To achieve this, business owners should prepare for the transition to retirement a minimum of three years before exiting their business.

You’re Ready, but is Your Business Ready, too?

Once the decision to sell the business has been made, the next question is how to sell your business to retire. Selling a small to medium-sized business has its complexities, and a large percentage of business owners aren’t aware of the tax consequences. However, with some careful transition planning and preparation it is possible to avoid costly mistakes and achieve a better outcome.

The first step is determining how much your business is worth. Having a professional assessment performed can help when it comes to evaluating how the business’s assets and liabilities line up with what prospective buyers may be willing to pay. Also critical is developing a tax strategy to minimize capital gains and other taxes which will help to maximize profits.

Preparing your business financials before listing it is crucial. To help seal the deal with prospective buyers you need to be able to produce current financial statements, current as well as prior balance sheets, profit and loss statements, tax returns, equipment lists, product inventories, property appraisals, and more.

Just as important as preparing a transition plan and strategic exit is considering life after you sell your business. You may be dreaming about taking those trips you’ve been putting off or buying a second vacation home. It’s important to consider the costs of life in retirement so that you have a solid idea of how much money is needed to fund your new lifestyle.

Your Next Steps

When it comes time for selling your business and retiring, you may view your business as a single entity to be sold as a lump sum. The IRS, however, regards your business as a collection of assets, which may be subject to capital gain taxes as well as other federal and/or state taxes.

Asset protection solutions, as part of a comprehensive estate plan, can help you save on taxes, protect your money, and grow your investments. All of which will enhance your enjoyment of that retirement you’re working towards. At the Jeffrey M. Verdon Law Group, our skill and experience could be exactly what you need to ensure your future.

Posted in Updates.