What to do in the next phase of your life after selling a small business
- Published: August 26, 2019
- Author: Kathryn Matheson
There are many opportunities business owners can pursue after the sale of their enterprise. What’s important is to work through the opportunities available to you and make an informed choice about the best future path to pursue.
This process starts well before the business is sold. The more time you give yourself to think through your future options before the sale, the better prepared you will be after it.
Most business owners have put their heart and soul into their business. So it’s important to consider how you will spend your time, as well as the proceeds from the sale, once it changes hands.
Here are some of the elements that should be factored into the decision-making process:
- Think through how to secure your financial future with the sale proceeds. Some people will prefer to invest in passive assets. Others will prefer to buy into another business in which they have an active role. A mix of the two is also possible.
- Consider the effect the sale will have on you and your family, who may have also had a deep involvement in the business over time.
- Work out how involved you are going to be in the business. Some people will prefer to have an active role for a period, others will want to hand over the reins completely. The right decision will depend on your wishes, and the preference of the new owners. There’s no right or wrong choice.
Tax a key issue
The tax implications of the sale are vital factors to consider. Different options will produce very different outcomes, and it’s essential to seek advice to minimise any tax payable.
Importantly, the structure of the business can have a big impact on tax when it comes time to sell the enterprise. For instance, businesses that are in a company structure don’t receive the same tax concessions as small businesses and trusts. However companies have other benefits. The right option depends on the type of business and the owners’ exit strategy, which should be a consideration when the business is founded.
When you do receive the final sale proceeds, many business owners wish to use some of the funds to give back to the community. Some choose to establish a charity, but it’s important to recognise this involves considerable work and effort to ensure the structure is legally compliant.
It’s important to do a feasibility study to work out the fundraising potential for the entity and to set up a board with experienced members to ensure it’s a credible foundation. It can be very rewarding once it’s up and running, but there is considerable work at the start to ensure it’s viable. Another option is to contribute time, money and energy to an established charity.
As this shows, there’s plenty to consider before, during and after the sale of a business. The idea is to plan ahead early, think through the many different facets of the sale and have an eye on the future. That’s the best way to ensure life after running a business is as successful as it has been beforehand.
The information contained herein is of a general nature only and is not intended to be relied upon nor is it a substitute for appropriate professional advice. Whilst all care has been taken in the preparation of the material, it is not guaranteed to be accurate. Individual circumstances are different and as such require specific examination. Lanyon Partners cannot accept liability for any loss or damage of any kind arising out of the use of or reliance upon all or any part of this material. Additional information may be made available upon request.