Handing Over the Keys: Transferring Your Business to Your Family
Maybe you’ve considered the question of whether to retire or whether to keep running your business. And you’ve decided it’s time to trade in your ergonomic executive chair for a cushy deck chair. But then more questions arise: What will happen to your business? Who will take over? And can you hand over the keys to your family with a minimum of fuss and bother?
First, carefully assess the relationship between your family and your business:
- Has anyone in your family worked at the company?
- Has any family member expressed an interest in taking over?
- Has someone currently working at the company shown talent at business management?
Once you’ve decided that your family can take over the business, what’s the next step?
Consider the type of business you’ve been running. Will your company be able to survive if you leave? If so, it’s important to get an appraisal of the actual value of the business. This makes a difference in any gift or sales that take place and taxes that might be incurred.
When you know the value of the company, you can plan for an orderly hand off. After all, your family legacy and your retirement income depend on it.
So, you’ve decided to call it a day and sign off on your last profit/loss statement. Now, you’re planning to kick back and enjoy the sunset from your deck while sipping a cold beverage. No more worries about your business. But will you need to continued income from your company to maintain a comfortable and active retirement? If so, here are some ways you can structure your exit from the company:
- Transfer the business as a gift, but continue drawing an income.
- Use a note to sell the business to your family. Payments on the note will provide a steady stream of income for the duration of the note.
- Retain ownership of some of the company’s real property, like an office building or warehouse. Rentals on the property could help you ease into retirement.
- Sell the company, but work part-time as a consultant or serve on the board of directors. Charge a reasonable fee for your expert business advice, of course.
Whatever method you use to transfer the company, make sure you get legal and financial advice first. A step that seems common sense may not be the most cost effective for you.
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At Keystone Law, our team of attorneys assist people with their legal questions every day. Check out our videos at keystonelawfirm.com or, to schedule an appointment, call us at (480) 209-6942. Serving Arizona communities like Ahwatukee, Sun Lakes, Tempe and more.