Every business and investment in a business eventually comes to an end, whether by sale, death, or dissolution. With this in mind, business succession planning needs to include estate, retirement, and tax planning. Making plans early, that can usually be adjusted, can result in maximizing the value of the business returned to you or your heirs, because once a letter of intent is signed or you are no longer able to make decisions, options may be limited. Some issues to consider include:
- Legacy. Is the business something you want continued by future generations or is its value what you want to pass on?
- Successor. Who could be your successor and what can you do to enhance transfer to your preferred successor?
- Manager. Do you need a caretaker or trustee to manage the business or its proceeds?
- Pre-Sale Transfers. Is there a benefit to transferring part of the ownership or value to an irrevocable trust or some other entity to reduce or defer the taxes due on a sale?
- Installment Sale. Does an installment sale or owner financing create sufficient tax savings to overcome the risk?
- Charitable Planning. Are there sufficient estate or tax incentives to justify gifting shares or value to a charity?
- Gifting. Are there sufficient reasons or benefits of gifting some ownership prior to a sale?
- Exchanges. Can you benefit by using exchanges of certain assets to defer taxes?
- Asset Stipulation. Is there a benefit to separating business assets for delayed or separate sales?
- Preparation. What actions can you take or defer to enhance the value of your business when you sell?
- Valuation. When would a valuation assist you and for what purpose?
- Co-Owners. Are your plans acceptable to co-owners and is their cooperation needed?
If you are considering the sale of your business in the next few years, consulting your attorney, accountant, tax advisor, and other professionals is a wise investment. If you have any questions, please contact us.