There are many business owners who would like to sell their company but do not have a financial plan in place. Therefore, they continue to do what they do best; run their business until they can’t anymore. However, if you plan properly, there might be a way to sell your business when you’re ready to retire and still live well. This article will offer you financial planning tips that all businesses owners should know.
1. INCORPORATE SALE PROCEEDS INTO YOUR OVERALL FINANCIAL PLAN
The first step after selling your business is to incorporate the sale proceeds into your overall financial plan. Work with a wealth manager to make decisions regarding the long-term management of your sale proceeds and retirement assets. Diversify your investments with a mix of low-cost, tax-efficient assets that align with your long-term goals.
2. ESTABLISH AN INCOME STREAM
Transitioning from a salary and profits to living off investments requires planning. Collaborate with your wealth manager to establish a tax-efficient monthly income stream that covers your living expenses. This ensures a smooth transition post-sale.
3. UNDERSTAND TAX CONSEQUENCES
Selling a company involves unique tax considerations. Categorize each asset sold (capital asset, inventory, real property, or depreciable property) to manage tax liabilities effectively. Consult a qualified tax professional to navigate this complex process.
4. PLAN FOR HEALTHCARE
If you sell your business before age 65, you won’t be eligible for Medicare benefits. Evaluate insurance options with your wealth manager and project how healthcare costs may impact your retirement cash flow.
5. REVISIT YOUR ESTATE PLAN
Major life events, such as selling a business, warrant a review of your estate plan. Work with your wealth manager and estate planning attorney to assess guardian designations for minor children, trusts, designated trustees, healthcare proxies, powers of attorney, and your will.
6. DEVELOP A CHARITABLE GIVING STRATEGY
After selling your company, consider giving back to causes that matter to you. Create an effective charitable giving strategy to maximize impact while minimizing taxes. Options include direct gifts of cash or appreciated securities.
7. PREPARE FOR YOUR NEXT CHAPTER
Before embarking on that yearlong cruise around the world, ensure you’ve addressed these financial loose ends. Your wealth manager can guide you through these steps, allowing you to enjoy the next phase of your life with confidence. Remember, each business sale is unique, so tailor these tips to your specific situation. Seek professional advice to make informed decisions and optimize your financial outcomes. If you are ready to sell your business, congratulations on this significant milestone. by Edward Vela M&A Advisor and Financial Planner
About the Author
Edward Vela is an M&A Advisor and independent Financial Planner with 15 years of wealth management experience. He earned a Journalism Certification from the University of Massachusetts, a BA in Political Science, a Financial Planning Certification at UCLA, and an MBA from the UCLA Anderson School of Management specializing in entrepreneurship and finance. You can contact Edward at 925-300-8805 or the empirikal partners team at empirikalpartners.com.
