Key areas to consider when exiting your business
Q I AM a business owner aged 55 and considering Exiting from my business, what are the key areas I need to consider?
A If you are over 50 years of age, the decisions you make now will have long term consequences and the areas that need consideration are: The financial prosperity of your family, the future of your business, capital acquisitions and capital gains tax, the quality of your life, the amount of stress & work that may or may not lie ahead for you and your family and how, when, and if you will retire? Getting it wrong now might be an irreversible process and lead you to miss major opportunities.
There are big tax challenges and opportunities that kick in for business owners from age 50 onwards that should be considered by you. At this stage, careful planning is required around various factors that might include:
- Reducing your workload at some point
- Getting others to take more responsibility, this may be family or internal management
- Ensuring that you have enough money to live on for the rest of your and your spouse's lives
- Succession & Inheritance issues
- Ensuring that you don't pay too much tax either by taking cash from your business at the wrong time, poorly timed pension drawdown or inefficient property debt or company structures
- Understanding & adjusting the risk/volatility profile of your pensions & investments to ensure sustainable future income
There are 3 key areas you need to consider:
Your Lifetime Cash flow Strategy: This involves developing a detailed picture of your income & expenditure for the rest of your life. You will need to consider your net worth each year for the rest of your life and then have a clear plan on how to keep income taxes to a minimum and how to structure your income & timing of drawdown of various income sources you may have.
Succession Planning (Capital Acquisitions and Capital Gains Tax): As you reach retirement age, it is likely that you will be giving thought to the transfer of your business or other assets to your children. If done incorrectly this can lead to unnecessary tax liabilities. You should have a clear plan for the ultimate transfer of your business & investment assets to the next generation. The plan needs to be complied by a qualified tax consultant and should meet your desires for the business and family in the most tax efficient manner. The plan should cover the complexity of your situation depending on business and personal assets, including properties owned. You need to consider all available tax reliefs to prevent any unnecessary tax leakage occurring as part of any transfers. There is a range of tax reliefs available.
Pension and Investment Analysis: Typically, business owners have little understanding of what role their pension and investments might play in their retirement plans, let alone the tax considerations when accessing such policies, You need to understand the following:
- Understanding pension fees & charges contained within existing policies
- Understanding and assessment of the nature of the risks associated with your pension funds
- Understanding of future likely tax free lump sums & income from your pension
If you need information on how to implement an exit plan tax efficiently, contact Jim Doyle on 053 9170507 or email firstname.lastname@example.org