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Know when you want to transition out of your business

a bunch of white doors in a flat grassy field

One thing is for sure, we all will transition out of our business. The questions are how and when? While none of us have the foresight to know for certain, your plan should include a transition that you desire instead of a transition you have to take.

A date certain transition is the most common transaction where business owners position the business for sale, find the right buyer, and receive the net proceeds necessary to move on to the next stage of their life.

A phase-out transition can occur several different ways. One way is through a transaction with a financial buyer who would like for you to stay involved in the business through a transition period and possibly hold a minority interest in the business.

Additionally, you may enter into an internal financial transaction with the current management or with the employees of the company. This type transaction can be structured where buyout is extended over a period of time and could enjoy some tax-favored deferrals.

The least favorable but sometimes necessary phase-out transition is the liquidation of the business. While you always want to be able to sell your business, there may not be a suitable buyer for the price you need. This type transaction should always be the last consideration, but any proceeds captured from this event would be incremental to what the business has already returned to you.

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