Business Transition

A big portion of your retirement plan is probably dependent on selling your business. With a carefully crafted business transition plan, you can help meet your retirement goals and successfully transfer your business. Even if you are not depending on your business for retirement, you may be planning for the ultimate transition it to family members.

A business transition plan may include a buy-sell agreement with your co-owners that outlines the terms of the sale, including triggering events and how and when the sale price will be paid. If you plan to have family members take over the business, the buy-sell agreement should be a “bona fide” agreement. In all family transfer situations, a professional valuation or appraisal is highly recommended to establish an independent fair market value of the business.

If you are going to sell your business interest at retirement you may be concerned about:

  • Determining how and when the purchase price will be paid.
  • Minimizing tax consequences.
  • Improving the creditworthiness of the business.
  • Leaving the business in good financial shape for the future owners.
  • Being sure the purchaser will have the funds to complete the buy-out.

If your plan is for family members to take over the business, you may also be wondering:

  • How long do I stay on for a successful transition?
  • Are they familiar enough with the business and ready to take over management?
  • What about my children who are not involved in the business?

Sales between family members are often subject to more scrutiny by the IRS. More specifically, the IRS may question the sale price or valuation method used. If the price is determined to be higher or lower than “fair market value,” the sale may be re-characterized as a part sale, part gift transaction, resulting in potential gift tax liability or inclusion of a portion of the sale price in the seller’s gross estate.

Funding the Buy-out

If you have established an agreement between yourself and your co-owners, one major concern is to be sure the purchaser will have the funds to complete the buy-out.Learn more

Sinking Fund

When there is time to plan, the use of a Sinking Fund (some of us call this a savings account) can be a way to accumulate money for the ultimate buy-out.Learn more

Installment Sale

An installment sale is a “seller-financed,” deferred-payment financing arrangement.Learn more

Gifting the Business to Family

The benefits of gifting a business to family members are two-fold.Learn more

Estate Equalization

Estate Equalization using life insurance can help ensure all of your heirs are treated fairly and equitably.Learn more