The 2022 clock is almost at midnight.
An end to a still somewhat crazy year — “the crazy” seems like our new normal, post-2020, am I right? There were a lot of challenges this year and they were … exhausting. Keeping up with the changes and adjusting to the economic pressures… well, these things can make you start looking for the exit door on this whole business ownership thing (and I’m going to talk succession planning strategy in just a minute).
Believe me, I get it. I’m a tax pro who went through the craziest few tax seasons most have ever seen these past few years. I wanted to smash that eject button more than once.
But maybe you weren’t phased by it all and ate up the chance to square your shoulders and meet the crazy face-to-face. And now you’re riding that high, dreaming far into the future for your Virginia Beach business.
Regardless of where you find yourself on that spectrum, let me say this: You have to make a plan for (one day) leaving your Virginia Beach business behind you – in some form or fashion.
Because time comes for us all.
If you’re thinking that you want to bring things to a close soon, we should talk about that so we can help you make sure you’ve got all your business ducks in a row — including the tax ones:
And here’s what life after you leave your company could look like …
Succession Planning Strategy For Virginia Beach Business Owners
“The victory one would gain after a whole life of work and effort is better than one that is gained sooner.” – Vincent Van Gogh
You’re not your business and your business isn’t you …
It’s a great theory, but… how true if you’re finally stepping away from the small business that you gave your heart, soul, and a big slice of your life to?
It’s all but certain you’ll have to leave someday — owners recently surveyed gave pretty varied targets for departure — but are you ready for what’s next?
Here’s how you can be.
Succession planning strategy: Plan to not fail
A solid plan can bring peace of mind and smooth out a process in business (and life). Time for such a plan now.
Business succession prep means finding or grooming people (often from within) to take over your company when you step aside. Succession plans usually come in two flavors: long-term and emergency. You’re looking here to make the former, which will be permanent after you leave the company and will help everyone see how your operation will be doing up to five years from now.
How many folks need to be affected by your plan? In a small company, it could be a matter of just replacing you (the owner). In a midsize business, you may need to be replaced on a team or a C-suite.
In other words, if you didn’t show up tomorrow, what role in your company would have the greatest impact on the bottom line? What skills are needed for that role? Who among your staffers (who can also lead) has most of those skills now? (To go outside your company, you might reach out to a headhunter or your referral network.)
Next, approach your company leaders. Tell them all you can about your succession plan and try to discern if they feel nervous — or accepting and ready.
Don’t forget to help that team of ready people cultivate their own backups and successors. Who among the lower-level staff has the right attitude but needs training and experience? That’s the real long-term plan for your company.
More than a third of biz owners leave the company to a relative. If your succession candidate is a family member, you can transfer ownership through your estate — but this can bring up a host of levies from Uncle Sam and elsewhere, including income tax, gift tax, and generation-skipping tax. Check with us before planning to pass your company to a family member.
Succession planning strategy: Don’t forget about taxes
If you’ve sold your company, the IRS usually examines the sale of each asset associated with your business rather than the sale of the whole business itself.
For tax purposes, you’ll have to categorize each sold asset as either inventory, real property, depreciable property, or capital assets — each with its own tax treatment.
Sale of capital assets results in a capital gain or loss, for example, and sale of inventory results in ordinary income or loss. This gets even more complicated if you retain an ownership stake in the company.
You also have to think about ways to protect and preserve the profits you made. Diversifying your investments can help here, holding different asset classes that don’t rise or fall together (tough, we admit, in the recent volatile/bull market) and exchange-traded funds or mutual funds, sometimes with a mix of bonds thrown in.
We don’t do investment advice, but generally the above will work to preserve wealth and get you the best possible tax situation.
Succession planning strategy: Living the retiree life
If you’re more or less stepping out of the work world after you leave your company, it’s finally time to take your place in all those idyllic pictures of retired folks relaxing: travel, gardening, former hobbies long dormant … Some retirees read the book they’ve always wanted to; some write the book they’ve always wanted to.
Pursuing your interests and lifelong loves can be fun. Some people manage to fill a whole retirement with it — and some don’t. Many biz owners find themselves thinking they’ll be stepping aside with no clear idea of what to do next. Feel free to resist overstating the role that leisure can fill in life after your company.
A lot of folks find semi-retirement works best for them. This can look like consulting in their former industry or gig jobs. (Browse the latter at sites like Upwork, Indeed, Freelancer, or Guru, to name a few that scored high in recent roundups.)
Many former biz owners not ready for retirement (say, in their 40s or 50s or younger) plunge right back into owning/starting a business. Why not? Four out of five small-business owners report routinely working overtime — a hard pace to just leave behind one day — and stats also show that startups with a 50-something at the helm are twice as likely to succeed.
No matter what you decide, we’re here to help with whatever stage you find yourself in.
To finishing strong,