What Should Retiring Business Owners Do With Their Companies?
There’s plenty to think about whenever someone is looking to retire from their career, however this is particularly true for retiring business owners. Aside from thinking about their personal plan for the future, retiring business owners have a big question to ask… What will happen to my company after I retire?
The answer to this question ultimately depends on whether retiring business owners want the company to continue trading under new ownership, or if they would instead like to close the company down completely. As such, there are three main options for retiring business owners. These are:
Selling The Business
One of the main options available to retiring business owners is of course selling the company. This can be a sensible option for retiring business owners who want to see their company continuing to trade, albeit under new ownership and direction. For those looking to ease into retirement, a majority stake of the company could be sold as opposed to selling all shares. This gives retiring business owners some level of involvement within the company without the previous level of responsibility. However, many retiring business owners will want to sell up completely and start enjoying a well-earned work-free life.
Implementing A Succession Plan
For retiring business owners that own a family-run company, it’s very common for a succession plan to be put in place. This involves handing over control of the business to family members. It’s sensible to phase over control gradually so that the successor has gained the necessary experience required to carry on the day-to-day operations. In non-family owned businesses, control of the company can still be passed on to an employee or partner, which will usually entail selling shares as well. Whoever you’re phasing ownership over to, the phasing out plan should be organised well in advance of the date that you’re planning to retire in order to prevent any obstacles.
Voluntary Liquidation
If retiring business owners do not wish to sell the company, or there is no viable successor to take over the company, the best option for closing the business is a Member’s Voluntary Liquidation (MVL). This is a tax efficient way of winding up the affairs of a solvent company, giving owners the freedom to enjoy their retirement. If the company has become insolvent, then any remaining assets can be liquidated via a Creditors’ Voluntary Liquidation (CVL). Voluntary liquidation is a popular option for retiring business owners, as it involves closing the company down in the most efficient way possible, taking any responsibility off the owner’s shoulders.
Other Key Factors To Consider
The biggest concern for retiring business owners is deciding what to do with their company, however there are other crucial factors to organise alongside this. Specifically, retiring business owners need to make sure they have the necessary financial means to fund their retirement via a pension scheme or from selling the business. Unless a company owner has significant savings or has sold the company for a huge sum, it’s likely that retiring business owners may need to rely on a pension scheme, and so this is an important factor to consider in advance. If the company is dissolved via a voluntary liquidation, retiring business owners will also receive money from the sale of assets and shares – This can be put towards funding their retirement.
If you’re a retiring business owner who is looking to close your company down, please don’t hesitate to get in touch with our experienced team at My Liquidation today.
