According to yesterday’s WSJ.com, far too many baby-boomer business owners are assuming that, when the time comes, they’ll simply cash out or pass the business on and have what it takes to retire. Not so, according to the experts who specialize in business finance and exit-planning. Things aren’t simple anymore when it comes to selling a business or transferring ownership of it within a family, not when today’s economic climate is so unpredictable and the tax rules are changing all the time.
The article cites six of the most common mistakes that business owners make when they’re ready to change gears or retire, as well as the steps they can take to avoid them. They are:
1. Creating a Business That’s Too Dependent on the Owner
2. Ignoring the Tax Benefits of Planning Ahead
3. Incorrectly Valuing the Business
4. Rushing to Accept the Highest Bid
5. Hiring (a Family Member) to Do the Deal, and
6. Underestimating the Emotional Impact of Selling.
Go to Preparing to Leave now for a more in-depth look at what you can do to avoid making these missteps.
Interestingly and with regard to the issues of tax benefits planning and business valuation (items number two and three above) in particular, the Tax Court recently issued a “landmark decision” that will allow owners of businesses to pass assets to their heirs more readily and with fewer tax implications. The decision as it currently stands is so potentially beneficial to tax-paying business owners that there is a fear it will be appealed by the IRS in short order. That said, the time to find out what the new rules’ implications are for you as a small business owner who wants to pass the fruits of your labor on to your family is now. Go to Shielding the Family Business by Laura Saunders at WSJ.com to learn more today.