Congratulations! You are to be commended for building a successful business. But before you pat yourself on the back, you need to ask yourself the following question: Do I have a plan in place to realize the value of my business if I die, if I want to retire or if I want to sell the business to certain employees, a third party or a family member?
Unless you have a plan in place that answers this question, you are planning to fail and will not realize for your family or yourself the value of your business. You could even put your family in jeopardy by not planning.
There are several things that you can do to sell or transition your business – all of which will realize the value of your business but all of which require advance planning.
1. You can sell your business to an outside buyer (not an employee or a family member). This entails meeting with an attorney who can advise on the specific steps you need to take so that a buyer will be interested in buying your business and maintaining that level of interest throughout the sale process. If you have not taken all of the legal steps necessary to sell your business, you will either not be able to sell it at all or will likely receive far less than what it is worth. Once you have completed the legal steps to sell your business, you will also need to meet with your accountant and financial advisor for additional assistance.
2. You can sell your business to one or more key employees and that too requires you to meet with your attorney to assist you in formulating a plan that works for you and your employee(s) because if the plan is one-sided (favors the employee(s) or you too much), it will either never be completed or it will fail, leaving you in a position from which your recovery will be difficult if not impossible.
3. You can sell your business to a family member, but that plan is fraught with legal minefields that must be navigated to succeed.
4. You can transition your business to family members already in the business or key employees. This option has a different set of legal minefields that must be navigated to succeed.
5. Assuming you are insurable and can afford the premiums, you can purchase a life insurance policy on your life with a death benefit equal to the value of your business. This plan might leave your family financially sound, but your business may not survive your death if planning that contemplates your death is not in place. In addition, this plan only considers your death, not retirement.
At The Kaiser Law Firm, P.C., we have counseled numerous business owners in developing a plan to sell or transition their business. If you don’t have a plan in place but would like to initiate a plan, please call us at 314-966-7766 to get started.