Considerations When Selling to Family Members or Key Managers
If you are a business owner nearing retirement, you may wonder what succession/exit planning strategy makes the most sense for you and your business. After all, you want to maintain your net worth and retire comfortably, but you also want to ensure a successful transition to your company’s next generation of business owners.
It’s important to be aware of the following if you plan to transition your business to family members or key managers.
Where to Begin
When selling to family members or key employees, you have many options for generating future retirement income, reducing your income taxes on the sale, protecting your net worth and helping the company thrive after your departure. Begin by making some basic decisions about how the sale will be structured.
1. Determine who will step in as majority owner
One of your first considerations is to decide who will have majority control of the business. If one person will ultimately have control of the company, you will need to transition a controlling interest of at least 51% to that individual. If control will be shared by two or more people, you’ll need to decide if one person should have majority ownership.