When creating your business plan, one of the first things you need to do is figure out how you will pass it on. This may seem counterintuitive, but it is a crucial thing if you want your business to continue after you leave it.
So what are your options when considering passing it on? Do you have to keep it in the family? Do you have to sell it? What would benefit you the most?
Gifting your business
The Small Business Administration discusses ways of selling or passing on your business. The first thing to note is that different situations will require different ways of passing down a business. What works for one owner may not work for you, even if you have similar businesses that are close in size, function and consumer base. Each one is unique and you should not expect someone else’s solution to suit your needs.
Next, you can potentially skip the buy-sell process if you have a relative to pass the business on to. You can gift it to them instead. Be aware of the fact that you may end up with gift taxes, but chances are, your small business will not involve enough money to trigger the gift tax. Keeping the business in the family will help if you value family legacy and want to be sure your business is in trustworthy and familiar hands.
Selling your business
But if you cannot pass it on, you will likely have to sell it. You can choose to sell to someone familiar, like a co-owner or key employee. You can also choose to sell to an unrelated third party or separate business. This depends entirely on your comfort level with who takes on the business next, and your financial situation.