By Sarah Stewart Legal Group
Oklahoma is a thriving environment for small business owners. In 2013, the Small Business Administration reported there were 337,066 small businesses in Oklahoma. Small businesses were defined in this survey as companies employing less than 500 employees.
Though business owners are savvy and skilled at many things, small business owners often neglect to realize the importance they have in their community, and the importance of planning for the continuation of their businesses when they can no longer run them.
And, let’s admit it, just like everyone else, we all hope to retire some day! If you want to do that successfully, you have to plan adequately.
So, the question is what should these business owners do with their businesses? How can we successfully leave behind the day-to-day activities and retire from our businesses when the time comes?
Studies have shown that for small business owners, on average, at least 85% of our net worth is tied up in our businesses. In order to properly withdraw assets from a business, you need to make a plan early.
The best exit plans will explore (1) when you will leave your business, (2) how you will sale or transfer ownership in your business, (3) how much money you will need to retire from your business.
You will also want to consider other factors that may be important to you, like how to care for long-time employees, maintain your business’s reputation, and stay involved with your community.
When making your succession plan, be sure to think about (1) asset protection- both for your business and your personal assets, (2) how to minimize taxes and maximize value, (3) training a successor, (4) continuing the business, and (5) wealth and estate planning.
Your exit plan should be fluid, allowing you to adjust to changing circumstances in your business. What if your first choice for successor isn’t available? How would you determine a secondary option? What if an unforeseen buyer offered you a lot of money to buy your business? What could they offer to buy you out?
To properly transfer a business to someone in your family or an employee, you will want to start the process at least 6 to 8 years ahead of time. If you want to sell, you should begin courting buyers at least 2 to 3 years in advance.
In every financial and business matter, the more you plan, the better it is for you and your family. Thorough planning ensures your course of action when you are ready to step out of your business.
It is never too early to start your exit plan, and the plan can be updated as your circumstances change. The most important thing is to start!