If
you own a business, you may well follow a "do it now" philosophy -
which is, of course, necessary to keep things running smoothly. Still,
you also need to think about tomorrow - which means you'll want to take
action on your own retirement and business succession plans.
Fortunately,
you've got some attractive options in these areas. For example, you
could choose a retirement plan that offers at least two key advantages:
potential tax-deferred earnings and a wide array of investment options.
Plus, some retirement plans allow you to make tax-deductible
contributions.
In
selecting a retirement plan, you'll need to consider several factors,
including the size of your business and the number of employees. If
your business has no full-time employees other than yourself and your
spouse, you may consider a Simplified Employee Pension (SEP) plan or an
owner-only 401(k), sometimes known as an individual or solo 401(k). Or,
if your goal is to contribute as much as possible, you may want to
consider an owner-only defined benefit plan.
If
you have employees, you might want to investigate a SIMPLE IRA or even a
401(k) plan. Your financial advisor, working with plan design
professionals and your tax advisor, can help you analyze the options and
choose the plan that fits with your combined personal and business
goals.
Now,
let's turn to business succession plans. Ultimately, your choice of a
succession plan strategy will depend on many factors, such as the value
of your business, your need for the proceeds from the sale of the
business for your retirement, your successor, and how well your business
can continue without you. If your goal is to keep the business within
the family, you'll need to consider how much control you wish to retain
(and for how long), whether you wish to gift or sell, how you balance
your estate among your heirs, and who can reasonably succeed you in
running the business.
Many
succession planning techniques are available, including an outright
sale to a third party, a sale to your employees or management (at once
or over time), or the transfer of your business within your family
through sales or gifts during your life, at your death or any
combination thereof.
Many
succession plans include a buy-sell agreement. Upon your death, such an
agreement could allow a business partner or a key employee to buy the
business from your surviving spouse or whoever inherits your business
interests. To provide the funds needed for the partner or employee (or
even one of your children) to purchase the business, an insurance policy
could be purchased.
Your
estate plan - including your will and any living trust - should address
what happens with the business, in case you still own part or all of it
at your death. The best-laid succession plans may go awry if the
unexpected occurs.
All
these business succession options can be complex, so before choosing
any of them, you will need to consult with your legal and financial
advisors.
Whether
it's selecting a retirement plan or a succession strategy, you'll want
to take your time and make the choices that are appropriate for your
individual situation.
You work extremely hard to run your business - so do whatever it takes to help maximize your benefits from it.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.