As a business owner, it is important for you to know how you will pass your business down. In fact, this should be one of the first things you consider as you build your business. After all, the work you did will amount to nothing if it collapses after your death.
So how should you pass it on? Who should you pass it to? Which option holds the most benefits for the potential future of your business?
Figure out your retirement plan
Business.com discusses ways in which you can pass down your business. They start by reminding you to consider your retirement. As a full-time business owner, you may not have a retirement plan in place. Thus, stepping down from the business – regardless of how it happens – can leave you in a financial conundrum.
To combat this, they suggest making arrangements to stay on the company in some way. For example, you could take up a position as a paid advisor. You could also leave the company but join in as an investor, which would allow you to attend board meetings. You can even put your name on rental property for the business, which results in the business paying you rent.
Selling or gifting
As for your options on how to pass the business on: you have several. You could sell or gift a portion or the entirety of your business. Each option has its benefits and drawbacks. For example, selling or gifting only part of the business might still leave you paying taxes. Gifting instead of selling could also result in your loved one paying gift taxes, though it may not apply. You can also choose to sell or gift to a family member, a key employee, or even the company itself.
You may want to sit down and discuss the matter with a legal professional. They can help guide you through the decision making process, especially if you find any portion of it confusing.