You have spent your time, your money and an enormous amount of hard work building a business from the ground up. You took the steps and followed through, now you have a business worth lots of money and want to be able to pass it down to the next generation. This is of particular importance when the majority of the family wealth is tied up in that business.
These are basic recommendations to prepare for when changing leadership in your business.
1. Obtain a thorough and honest valuation of your business before beginning the transfer.
When you have an accurate assessment of the value of the company and all its holdings, you are better prepared to start transferring those holdings to the next generation. It is also essential for estate and tax purposes.
2. Careful financial planning is essential when transferring assets.
You might even have to get an attorney through this process. You want to be able to qualify for the best tax brackets that will not cripple the new owner of the business. Because the tax code can be byzantine in this country, you need to get help with this part of the business transfer.
3. Create a business transfer that pays you a decent amount of money yearly.
This was you business after all. It is perfectly acceptable to create a transfer of power and assets that continues to pay you through your retirement. Private Annuities and Grantor Trusts will allow you to transfer the business and all assets in exchange for a lifetime salary. Depending on the size and scope of your business this amount can be significant. Again, these types of transfers are tied up with tax and estate issues, so get help through this process.
4. Get the legal and estate expertise you need.
Handing over a business is not an easy or painless process. The more you plan for the eventuality, the smoother it will run for you. Set some plans in motion now, and determine how you want the business to work for you after you have retired. Choosing a successor several years prior to the fact is a huge help. Most important of all? Get help with the tricky tax and legal stuff.
There are many options available both financially and personally when transferring a business into different hands, know about all of them.