EXIT PLANNING: WHO NEEDS IT, WHO WANTS IT AND WHY
If you own all or any part of a closely held business, you likely know that you need some kind of a contingency plan in case the unexpected occurs. Do you know if you also need a plan to help you sell or gift your business if you do not die or become disabled?
Exit Planning is the process that brings all of the elements of a successful planned business transition together with other personal planning matters. The purpose is to assist you in achieving your goals so you can exit your business in a timely, tax-effective, organized and successful manner without leaving a wake of family and/or business problems behind.
Who needs an exit plan?
Each sole business owner, as well as any business owner who is ready to sell today needs an Exit Plan immediately. Other business owners most in need of an Exit Plan are those who, within the next ten years, will:
- Want to sell their business to a third party;
- Want to sell or gift their business to a family member or to a key employee;
- Want to sell their business, but are unsure to whom;
- Want to sell their business, but want to remain active in it for some time to come;
- Want the business to remain intact during a period of ownership change;
- Want to continue to own the business, but significantly decrease the amount of time he or she dedicates to the business; or
- Have a co-owner who wants to sell his or her share of the business.
Why have an exit plan?
The short answer is that only an Exit Plan will really help you to fine tune your objectives for the future of your business, identify issues that must be addressed in order to make the plan work, and then keep you on track to achieving your business and personal goals.
Consider how sure you are about the answers to these questions:
- How exactly will you maximize the chances of achieving your business and personal objectives?
- What is the value of your business if it were sold today?
- How will income and estate taxes affect what you and your family receive for the sale of your business?
- How much exactly do you need for retirement?
- How can you turn your business into a financially secure retirement vehicle?
- What will happen to the business if something unexpected happens to you?
- Do you know whether and how the recent tax law changes will affect your Exit Plan?
The Exit Planning process is designed to answer these and many other questions based on your particular situation.
You have invested a lot of time, effort and passion into developing your successful business. You most likely did a fair amount of strategizing and planning to build it. If planning was a smart way to build the business, doesnt it make sense that planning would also increase your chances of having a successful exit from the business?
Why make a successful exit?
Typically, a major portion of your assets are likely to be tied up in the business. A closely held business is an illiquid asset. An Exit Plan will increase the likelihood that you can turn that illiquid asset you worked so hard to build into cash or other investments so you can really reap the rewards of all of your efforts.
Even if money were not an issue, you may be justifiably proud of your business and want to leave it intact as a legacy. You may have family members or key employees in the business and their futures may be very important to you. You might just want to stabilize the business so you can continue to work, but on a more limited basis while you retain ownership.
An Exit Plan developed with an exit strategist establishes your objectives and is tailored to your goals, your situation and your business and family. It is the most effective way to move you closer to achieving the results you want both personally and professionally.