If you own a business and are planning to retire, or are just moving on to bigger or better things, you need to prepare for the sale – or “transition” – of your business. Before you rush to put up a “For Sale” sign, there are many considerations and questions to ask yourself before planning such a critical step in your career or retirement plan.
Put Together a Transition Plan. First and foremost, you need to create a plan as to how you want to transition your business. Namely, how do you want to move on from your business? Some possible options are:
- Sell to a third party
- Transfer the business to an existing employee
- Pass down the business to a family member
- Continue to own the business and hire a management team to run it for you
- Liquidate the business and sell your assets and inventory
Will you transfer the business all at once or are you able to transition the business more slowly under an agreement to remain with the business for a period of time to train the new owner? Are you open to options such as hiring a management company to operate your business or selling your business over time in installments? Only after carefully considering these and other options can you move forward with a smooth transition process.
What is My Business Worth? You must determine the value of the business. Reviewing financial statements and comparing the worth of other similar businesses is the best way to determine value. The closer you come to transitioning your business, the more important value becomes, so it is essential to contact the right professionals to ascertain value.
When to Act? Timing is important when transitioning your business. Advanced preparation is necessary to ensure that the business is transferred at the most advantageous time for you. For example, if you are selling to a third party, you want to time your business sale when the economy is in and upswing to maximize your return. However, if you wish to gift your business to a relative, you may want to wait for a downswing in the business to get a lower valuation for tax purposes.
Don’t Wait; Communicate! The Most important thing to remember is that any sale or transfer is something that should be planned well in advance with experienced professionals to assist in the eventual transition. Every business is different and may have unique considerations to accomplish a legally compliant and smooth transition. Assistance from qualified legal counsel and other appropriate professionals can be a cost-effective, time-saving, and proactive way to plan for the future.
The attorneys at the Law Firm of DiOrio & Sereni, LLP are experienced and available to help you. Please contact Matthew H. Fry, Esquire at the Law Firm of DiOrio & Sereni, LLP at 610-565-5700 or email him at firstname.lastname@example.org.