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Whether you’re planning to retire or move into another line of work, the time may come when you choose to sell your business. Taking the time to plan your strategy now is essential to ensure that everything goes smoothly when it’s time to transfer ownership to the buyer.


Does Your Estate Plan Include the Use of Trusts?

Assuming you have already established an estate plan, it’s a good idea to incorporate one or more trusts into it. Trusts offer many benefits, including assigning an independent trustee for help in asset management, ensuring that wealth you have accumulated from owning your business is distributed how you would like, and making sure that any inheritance your children receive doesn’t go to their spouse in the event of a divorce. We also recommend reviewing the distribution options of your trust and setting them at regular intervals such as five or 10 years.


Plan Major Purchases and Review Your Retirement Plan Now

Perhaps you have long dreamed of taking an overseas vacation or purchasing a cabin in the country. After all, you deserve such a reward after working so hard for so many years. Before you follow through with a major purchase, be sure to discuss it with your spouse if you’re married and agree on spending the money. You may also want to get tax advice on the purchase from an accountant.

The time leading up to selling your business is also ideal to review your retirement plans, especially if you don’t intend to draw on them right away. You can provide yourself income in retirement by continuing to receive the proceeds from rentals and real estate holdings in the name of your company. Another idea is to ask the new owner of the business to include health insurance and other benefits you currently enjoy when finalizing the sale.


Know the Estimated Taxes from the Sale of Your Business in Advance

We recommended having your CPA present during negotiations for selling your business. This allows you to get a good idea of how much your tax liability might be at the time of sale. You will then want to establish or maintain reserves of cash so you can make your tax payment on time. Some other things to consider are increasing the spending for your business and deferring income it receives during the calendar year that you plan to sell. Sitting down with your accountant for cash flow planning can help you achieve these objectives.


Increase Your Charitable Giving

If you have family members who will be attending college in the future, consider setting aside some of the proceeds from the sale of your business to fund a 529 higher education plan. This lowers your tax liability while providing for your family at the same time. Additionally, speak to your accountant about whether setting up a donor advised fund to distribute money to other causes is a good strategy right now.


We understand this can be a complicated and overwhelming prospect. Please contact us for more guidance on preparing for the sale of your business if you would like additional assistance.  We’re happy to help!

You need all the help you can get to run a small business successfully, and  Doerhoff & Associates is here for you.  We strive to provide what you really want and need – a unique and customized set of services to fill the gap and support you, the business owner.