It is one of the most overlooked components to a business â€“ the exit strategy. With the significant amount of hours owners invest into their business, the majority of them fail to take the time and develop a proper exit plan. It is inevitable that every business owner will exit their business at some point; whether it be through retirement, death, or because of a disability. The more important question is â€œwhen will that happen?â€ and â€œhow will I cope with it?â€ The sole purpose of an Exit Plan is to address these concerns.
If youâ€™re currently an existing business owner, or intend to start your own business sometimes planning for the unexpected is the smartest business move one can make. The following are some questions that should be taken into consideration:
1. Do you know when you plan on retiring? 2. Do you know who you would like to sell or transfer your business to upon retirement, death, or disability? 3. Do you know how much your business is worth today, in cash? 4. Do you know how to sell your business to a third party and pay the least possible taxes? 5. Do you know how to transfer your business to family members, co-owners or employees while paying the least possible taxes and enjoying maximum financial security? 6. Do you have a plan for your business to continue if the unexpected happens to you? 7. Do you have a plan to secure financial independence for your family if the unexpected happens to you?
Understanding time is always of the essence with entrepreneurs, establishing an Exit Plan requires the use and incorporation of your business legal documents and your current Estate Plan, as the strategy to exit a business shall always be mentioned in the Will or any Trusts, as well as in any Shareholdersâ€™ or Operating Agreements. Unfortunately, it is all too common for business owners to use online services to have their business legal documents drafted, only to find the document itself is missing substantial key clauses. With the amount of time and money invested in your business, spend a little more and be sure to have all your legal documents properly drafted.
So, if you havenâ€™t done so already, speak to an experienced attorney and set up a free consultation to learn more on how Exit Planning can be beneficial to your business. Some of the key areas you could expect to discuss are:
â€¢ Maximizing and protecting the value of your business; â€¢ Business continuity so your business can operate without you; â€¢ Ownership, control and management transfers related to your business; and â€¢ Personal wealth and estate planning.
Remember, Exit Planning is not a one-time process. Your Plan is a living document that must be continually measured and adjusted as your circumstances and objectives changeâ€¦but you should start that process now.
Adil Daudi is an Attorney at Joseph, Kroll & Yagalla, P.C., focusing primarily on Asset Protection for Physicians, Physician Contracts, Estate Planning, Shariah Estate Planning, Health Care Law, Business Litigation, and Corporate Formations. He can be contacted for any questions related to this article or other areas of law at firstname.lastname@example.org or (517) 381-2663.