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Your Income and Post-Transition Plans

QUICK SUMMARY

Thinking of selling your business or passing it on to your heirs? Smart planning is critical. A key consideration is how to do so in a way that achieves your goals, both today and tomorrow. This three-step plan helps ensure that you’re thinking about the right issues in advance of the transition.

STEP 1: Determine What You Want/Need from the Transition

  1. Consider the costs of supporting your current and future lifestyle. Tally up today’s and tomorrow’s financial obligations.
  2. Determine what you want to do now. Retire? Start a new business? Get a job? Stay on as a consultant to the business you’re selling?
  3. Consider your income, including expected income from the sale as well as your savings and any future income.
  4. Work with your accountant and/or attorney to structure your transition and payout.
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STEP 2: Base Your Income on Your Post-Transition Plans

Structure a plan to make your future vision a reality. Among your potential income sources are:

  • Salary, bonuses, retirement and other benefits you’ve established over the years
  • A negotiated equity stake in the company
  • Lump-sum sale proceeds
  • An installment note in which the buyer pays you set amounts over time
  • Retaining ownership of real estate or equipment and leasing back to the buyer
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STEP 3: Prepare a Financial Plan for Your Sale Proceeds

  • First pay capital gains taxes on any cash proceeds from the sale in the year(s) in which you receive them.
  • Then protect and grow the remainder to provide for your future needs.
  • Consult a skilled financial planner to help you with critical issues such as retirement and estate planning.
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