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Retirement succession plans

Posted March 27, 2013 in Advice Column, Beaverdale

If you own a business, you may follow a “do it now” philosophy. You also need to think about tomorrow — which means you’ll want to take action on your own retirement and business succession plans.

Fortunately, you’ve got options. You could choose a retirement plan that offers at least two key advantages: potential tax-deferred earnings and investment options. Some retirement plans allow you to make tax-deductible contributions.

In selecting a retirement plan, consider several factors including the size of your business and the number of employees. If your business has no full-time employees consider a Simplified Employee Pension (SEP) plan or an owner-only 401(k). If your goal is to contribute as much as possible, consider an owner-only defined benefit plan.

If you have employees, investigate a Simple IRA or a 401(k) plan. Your financial advisor, plan design professionals and tax advisor can help you analyze the options and choose the plan that fits your goals.

Now, let’s turn to business succession plans. Your choice of a succession plan strategy will depend on many factors, such as the value of your business, your need for proceeds from the sale of business, your successor and how well your business can continue without you. If your goal is to keep the business within the family, consider how much control you wish to retain, whether you wish to gift or sell, how you balance your estate among heirs, and who can succeed you in running the business.

Many succession planning techniques are available, including sale to a third party, sale to your employees or management, or the transfer of your business within your family through sales or gifts during your life, at your death or any combination thereof.

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. 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 should address what happens with the business, in case you still own part or all of it at your death. The best-laid succession plans may go awry if the unexpected occurs.

All these business succession options can be complex, so before choosing, consult with your legal and financial advisors.

Whether it’s selecting a retirement plan or a succession strategy, 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 maximize your benefits.

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Information from Edward Jones, provided by Jim Talley, financial advisor at Edward Jones, 2703 Beaver Ave., 279-4179.

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