There are many aspects you as a business owner need to consider, plan, and prepare for. The number of these aspects increases when thinking about what you want the business to be in the future. Do you want to keep your business in your family? Are you sure the steps you’re taking now will allow that to happen easily and legally? Will your plans get you the most financial gain possible when you exit? We’ll look at options and tips to answer these questions below.
The best time to start planning for the future of your business was yesterday. The second best time is today. You’ve just spent money weeks, months, even years being committed to every aspect of your business. While it’s nice to be able to relax after you’ve built a business, you also need to make sure that the future of your business, your family members, and key employees or management is taken care of and agreed on. Of course, being set up with the correct business model is also crucial. Whether you and your attorney think any of the following business structures listed below is best for you, it’s important to have a clear vision and focus moving forward:
- Sole Proprietorship
- Limited Liability Company
To have these plans out there and agreed on is a great way to ensure future success. This will also decrease stress and the likelihood for arguments while transitioning the business to new ownership. It’s wise to have plans that make efficient use of tax and estate planning as it ensures the maximum financial benefit when selling a business or changing ownership. To be “transaction ready”, this process may take up to two years depending on how much information, reports, and other factors the buyer wishes to see before making a decision. Having many of these decisions and pathways already answered makes it easier to transition your family business. You’ll want to know what would happen in the event of an offer to buy or retirement of an owner.
Open communication involving a business and tax attorney, current management, and other employees is really going to make plans run smoothly. There are many different parties involved who may see or want different things for the company. That is why you as the current owner should be asking yourself these questions and putting a plan for the future in place.