If you own a business, you may well follow a “do it now” philosophy — which is, of course, necessary to keep things running smoothly. Still, you also need to think about tomorrow. Fortunately, you’ve got some attractive options.
In selecting a retirement plan, you’ll need to consider the size of your business and the number of employees. If your business has no full-time employees other than yourself and your spouse, you may consider a Simplified Employee Pension (SEP) plan or an owner-only 401(k), sometimes known as an individual or solo 401(k).
If you have employees, you might want to investigate a SIMPLE IRA or even a 401(k) plan. Your financial advisor can help you analyze the options and choose the plan that fits with your combined personal and business goals.
Now, let’s turn to business succession plans. Your succession plan strategy will depend on many factors, such as the value of your business, your need for the proceeds from the sale of the business for your retirement, your successor and how well your business can continue without you. If your goal is to keep the business within the family, you’ll need to consider how much control you wish to retain (and for how long), whether you wish to gift or sell, how you balance your estate among your heirs and who can reasonably succeed you in running the business.
Many succession plans include a buy-sell agreement. Upon your death, such an agreement could allow a business partner or a key employee to buy the business from whoever inherits your business interests. To provide the funds needed for the partner or employee (or even one of your children) to purchase the business, an insurance policy could be purchased.
Your estate plan — including your will and any living trust — should address what happens with the business. The best-laid succession plans may go awry if the unexpected occurs.
Whether it’s selecting a retirement plan or a succession strategy, you’ll want to take your time and make the choices that are appropriate for your situation.
You work extremely hard to run your business — so do whatever it takes to help maximize your benefits from it.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.
Information provided by Daniel Evans Jr., financial advisor, Edward Jones, 1129 42nd St., Des Moines, 274-9811.