25 Jan Tips for retirement and succession planning
Retiring From Your Small Business
Eventually, because of age, health or other reasons, most of us will eventually consider the idea of retirement. But, unlike your friends who are employed by others, the idea of retirement is not simply a matter of picking a date and signing up for retirement benefits. In most instances, the business IS the bulk of the retirement fund. So, the question really becomes, “how can my business pay for my retirement?” In some cases the answer will involve selling the business. In other instances the answer may include continued business ownership but allowing others to run the business. Often the fact that other family members and especially younger generation family members are already involved in the business will have a strong influence on how best to retire from your small business.
Every business and situation is unique so there is no single best way to retire from your small business. However, there are some universal considerations:
- Plan and Plan Early. Regardless of how you decide to set up your retirement, you will need time to ensure the greatest benefit from your retirement. DO NOT WAIT until the year that you intend to retire. Too often we wait until we are forced to retire, and then it’s too late to maximize value.
- Begin Separating Yourself From Your Business. The retirement value of your business, whether it is sold or operated by another for you, is generally based on how profitably the business runs without you at the helm. Separating yourself from your business may be difficult and will take time, but will make a tremendous difference when it’s time to retire.
- Clean Up Your Books. Financial records are the only tangible evidence an outsider can use to value your business. But, to minimize taxation, much of our business career is spent minimizing taxable income and the taxable value of assets. Work with your accountant to ensure that your financial records fairly reflect the success and value of your business.
With thoughtful planning and strategic preparation, retirement could be the best business decision you’ve ever made!