There are many ways for business owners to leverage their businesses and fund their retirements. Whatever your particular strategy — to sustain the business, sell, transfer or close your business — it is critical that you start planning for it well before you are ready to retire. If you choose to wait until you are ready to retire to come up with a plan, your options — and the value of your business asset — may be limited.
If you start early, there are many things you can do to significantly increase the value of your business and the amount you can shelter and save. Consider the following five strategies to fund your retirement from your business assets:
Sustaining the business: If you can find ways to leverage yourself with the right management and business systems, you can actually work longer than anticipated. According to SunTrust Business Owner Research, nearly half (47 percent) of owners plan to keep working and live off the income from their business as long as possible. In fact, many owners don’t plan to retire at all in conventional terms. Rather, they define retirement as “slowing down,” “working less” or “working at what I love more.”
Selling the business: Nearly a quarter of owners (22 percent) plan to sell their business assets as part of their retirement strategy.1 It is far more likely for owners to capitalize on the value of their business in a wide variety of alternative transactions, such as taking on partners, executing buy-sell agreements, creating Employee Stock Options Plans (ESOP’s), merging with competitors and completing asset sales.
Transferring the business: You can pass your business on to family members, employees or a designated successor. A thorough succession plan will clearly define the terms of succession, roles of those involved and planning for taxes if relevant. It is critical to talk through succession plans with each person who is involved in the succession whether as management, owner or investor. Business owners sometimes overlook employees who are best suited with the passion and expertise to sustain the business.
Sheltering business profits and value: You can shelter more of the money your business earns from taxes with a retirement plan such as a 401(k) or SEP IRA, and through smart tax planning. Most owners (nine out of 10) don’t take advantage of these types of pragmatic options. Ask your SunTrust banker about the simple and affordable SunTrust Online 401k Plan.
Growing business profits: You can find ways to grow business profits and maximize cash flow, allowing you to save more money for retirement and build the value of your business if you choose to sell. In fact, SunTrust Robinson Humphrey, the corporate and investment banking arm of SunTrust, assists companies with identifying the value drivers for businesses. An estimation formula can be created for your business to help track and monitor the strength and value of the business for retirement planning.
1 Arrange a meeting with your SunTrust banker to discuss your retirement plans. Your banker has access to expert resources and tools to help you put a plan of action in place today, including succession plans, investment plans and retirement plans, as well as estate planning.
About SunTrust Business Owner Research:
SunTrust surveys small business owners and advisors as part of its ongoing business seminars and symposiums. The small business owners attending these events include both SunTrust client and non-client business owners and are representative of the broad spectrum of businesses located in the SunTrust markets. The research cited in this report is extracted from these 5,425 small business owner surveys collected between 2007 and 2011.
This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.
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