Should You Sell Your Business Or Pass It Down?
SouthState Private Wealth Planning Advisor George Meyls, CFP, LIFA has years of experience helping business owners think through their business succession plan. Whether an owner plans to sell their business or pass it down, they should be thinking about a variety of factors, which are all covered in this video.
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Hi , my name is George Meyls and I’m a Financial Planner with South State Private Wealth. If you own a business, and are nearing retirement, there are several considerations to keep in mind in preparation for your business succession or sale:A. What type of entity is your business, and does it still meet your needs from a tax perspective or a sale- transition perspective? This is worth reviewing periodically to make sure your needs are still being met.
The entity type will impact the structure of the sale transaction and should be considered well in advance of starting the sales process.
The type and amount of taxes that must be paid are directly impacted by whether your company is a sole proprietorship, partnership, or corporation.
Tax implications can have a significant impact on the realized value of a business to both the buyer and the seller.
B. How strong is your management team? Can someone step in and run the business if you were no longer in charge of the operations? It’s advantageous to have someone who already understands the company’s operations and the core values.
An ideal candidate is one whose developed rapport with co-workers, suppliers, and customers. Is there an internal candidate with the right skills, experience, and drive to take on a leadership role? Formal training in the business and management can be key for potential successors.
C. What is your business worth? It’s important to have an idea of your businesses current value. Have you had an independent assessment of value done recently? Have you identified the true drivers of your business value and determined if that is “transferable”?
All business owners understand that without growth a business cannot survive. However, buyers or successors usually want to know, not only how much revenue growth your company generated, but also “how” you did it.
Does your business run in a manner that makes it difficult, expensive, or risky for a buyer or successor to take over? If so, your business may be less valuable at your exit.
For example, if you are your company’s most valuable employee, this probably reduces the businesses value to anyone but you.
Finally, as you begin to consider retirement it will be important to assemble a team of professionals. You will need your CPA, an attorney, and of course your South State financial advisor. We look forward to being a resource to you as you move along on this journey.
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