Exit Planning

What Changed

Nothing changed per se. However, there are many changes to take into consideration when planning for an exit. Consider which structure makes the most sense for your business and what time frame you’re working with to benefit from tax changes.

Planning Opportunities

As a business owner, exit planning is a major, one-time opportunity that warrants long-term attention through your company’s life cycle. Understanding the strategic options for exiting your business can help extend the value of your business and its legacy, while preserving the wealth generated for your future.

Here are some basic strategies to consider when planning your exit.

Keep it in the Family

You can transfer ownership of your business by gifting or selling your ownership interests to other family members. Consider your future income needs, gift and estate taxes, and the impact of your decisions on family members who may or may not be involved as the next generation of owners.

Management Buyout

If your family members aren’t able or willing to take the reins, a management buyout might be a good option. Benefits could include saving time and resources that would otherwise be spent finding an outside buyer and shorten the learning curve for new owners. This could help them maintain the pace of business, resulting in a smoother transition that ultimately funds your buyout.

Employee Stock Ownership Plan (ESOP)

These enable your employees to become owners through a qualified retirement plan and to purchase stock in your company. About two-thirds of ESOPs are used to provide a market for the shares of a departing owner, according to the National Center for Employee Ownership.

Outside Sale 

If opportunity knocks on your door and the right buyer finds you, you may be able to sell your business at a premium. Whether you plan to sell your business in two or 20 years, you could increase your odds of getting a great price by understanding the current and future value of your business and the ideal entity structure. It’s important to take the time and steps required to get your business into sale-ready condition.

Ownership Transition

If you intend to exit or transition the business to new ownership, consider your planning options well in advance—not only because planning can be financially rewarding but also because it can give you peace of mind.

Comprehensive Plan

A comprehensive plan should address business and personal financial planning, management succession, estate planning, and ownership transition together.

Advisor Insight

If you’re considering the sale or transfer of a wholly owned subsidiary of your organization, determine with your advisor if the subsidiary has made any tax elections that affect the taxability of the transfer. This is particularly important in situations involving a subsidiary that’s either a single-member LLC or an S corporation.

More Resources


Webcast
More baby boomers are retiring from the workplace, creating unique challenges for all types of businesses, especially professional service firms, which count on the experience of their personnel. Join us for this webcast where you’ll gain insight into developing strategies to support retention of institutional knowledge, replacement of leadership, and sustainability of your business operations.

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Tax reform may significantly affect tax strategies for estate planning. We look at key provisions—and opportunities—in our Alert.

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Effective pretransition preparation can improve the conditions of a sale and help owners and executives meet personal and professional goals.

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Employee stock ownership plans can help simplify the sale of a company. We look at how ESOPs work along with other exit strategies.

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An employee stock ownership plan (ESOP) motivates, retains, and rewards employees who help make a business successful. It serves as a great exit strategy with some fantastic tax benefits, but it’s also a retirement benefit for your employees.

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The Tax Cuts and Jobs Act expands benefits but also limits certain tax breaks for businesses. We cover the wins and losses in our Alert.