Exiting Your Business

For some people their business is a separate entity that will continue after they retire or leave. For others it is so closely dependent upon their personal input that it will simply come to an end when they stop working. Either way, you need a carefully planned exit strategy that will enable you to optimise your position when the time comes.

Here are some possible scenarios:

Passing on your business to your children or other members of the family. You will need to be careful in your choice of successor, especially if some of your capital will remain tied up in the company, for example in shares. You will need to put in place the right mechanism to effect the transfer and make sure your plan is tax effective. It is important to consider how much control you are prepared to give up on retirement.

In some cases it will not be possible to retain control once you retire, though you may still have a degree of influence. If you are passing the business on to family members, do not overlook the fact that you can appoint them as directors and hand over the day-to-day running of the business while retaining control of the company through your shareholding.

Also you may wish to consider using trusts as a way to pass an interest in the company on to family members while continuing to exercise some control.

Selling your share in the business to your co-owners or partners. This might already have been considered and incorporated into your partnership or shareholders agreement. You will need to be able to place a value on your share in the business – or accept a return of capital plus an annuity from your partnership. We can help by advising on agreements and also by valuing your business.

Selling the business to a third party. Again, you need to know the value of your business and how the funds released by the sale can best be invested to provide you with a comfortable retirement or to begin a new business venture. Valuable tax reliefs are at stake here, so consult us early in your planning to avoid an unnecessary tax bill.

Public listing or sale to a public company. This might be an option if you have a sufficiently large business, or a niche business attractive to a larger company seeking to expand its activities. A great deal of care and planning is required if you are to make the most of such an opportunity.

Selling your business to some or all of the workforce. Through company share schemes and pre-sale agreements you can reward your workforce on an ongoing basis in the form of equity – a stake in the business. One possible conclusion of widening ownership of the company in this way might be to pass control of the company to the workforce on your retirement.

Winding up the business. If the business is simply going to come to an end when you retire you need to ensure that when the time comes you collect all monies owed to you and realise the value of the business assets. After all, these are an important part of your ‘retirement fund’. Again you will need to arrange this properly to minimise your tax liabilities and maximise your income in retirement.

Whatever plans you make for retirement, or for withdrawing from your current business, careful planning and the right advice are essential.

Careful planning and professional advice are essential at every stage of your business life. The best time to start planning is now. We would be happy to advise you further on developing SMART strategies for you and your business.