What happens to your business when you retire or die? Have you made any decisions about whether to sell your interest, pass it on to children, or make other arrangements? The plans you make will have practical and tax implications for you, your family, and your business.
Succession planning is a complex and ongoing process involving both practical (business) and legal concerns. This chapter is designed to acquaint you with some of the issues you'll need to address in succession planning; it does not address every issue that may apply to you. Work with a knowledgeable advisor to help you structure, monitor, and modify your succession plans.
There may be a variety of reasons why you leave your company. They include retirement, disability, being a serial entrepreneur (selling this company to start another one), or death. Whatever the reason, there are several exit strategies.
Before you make any plans, it is a good idea to determine what the business is worth now (the value may change in the future, but plans can be adapted to accommodate valuation shifts). This is done by obtaining a business appraisal. There are various formulas used to determine the value of a business:
- Asset and earnings valuations (factoring in intangibles such as ...