As a business owner, you have put a lot into your company. Beyond the obvious financial investments and sacrifices you’ve made, you’re poured your ideas, time, and energy into building your business to its current state. That’s why it’s so important to include business succession planning in your estate planning efforts.
Figure Out When You Want to Leave
Perhaps one of the most important questions to answer as a business owner is “When do I want to leave?” Maybe you want to work to retirement age, sign over full rights to the business, and spend your golden years completely free of any work responsibilities. Maybe you want to maintain ownership until you pass and include it as part of your estate. Perhaps you’d like to step down at an early age but still have a hand in running the business. No matter what you decide, you should spend some time considering your options.
How Involved Do You Want to Be?
Another part of business succession planning is figuring out how involved you want to be after you step down as owner. Some owners choose to completely leave the business after selling it or passing it on, but others choose to stay on in an advisory role to support the new owners and keep the business on the same path. Others combine the benefits of both options by temporarily serving in an advisory role during the transition and stepping down afterward.
Figuring Out Your Company’s Value
If you want to pass ownership of your business to a family member or loved one, you don’t have to worry about getting a fair price for it. However, if you plan on selling part or all of your business, proper business valuation is essential. Common methods of business evaluation include asset-based valuation, which combines the value of all of the assets owned by the business; competitive analysis, which compares your business to similar businesses in the area; and earnings multiplier, which is based on the annual earnings of the business.
Planning for Your Transition
Your estate planning attorney can help you create a plan that honors how and when you want the transition to happen. You’ll decide which circumstances will trigger the handover or sale of the business. For example, you may choose to hand over the business if you become disabled or incapacitated, at a certain age, or upon your death.
Make sure that your business continues to thrive and serve your community after your passing with a comprehensive succession plan. For more personalized advice, reach out to the Law Offices of Tyler Q. Dahl at 916-545-2790.
Dahl Law Group
