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Combining Owning a Business and Retirement

Mature couple relaxing on deck-chairs at beach. The woman is reading and the man has an open laptop.

Whether you’re planning on retiring now or in the future, if you’re a business owner there are plenty of ways to make an established business work for you no matter what your plans are.

There’s a disconnect, isn’t there, between owning a business and retirement? Owning a business sound like it’s a busy time with lots going on. Conversely, retirement conjures up images of cruises, grandchildren and winged back armchairs.

I would contend that retirement should be one of the busiest and most fun stages of your life. I would also suggest that the years you are the CEO or MD of your business is the period of your life when you might be focussing the least on yourself.

The question then, is how can you get the most from your life’s work and transition into a great retirement? Starting with the end in mind is my initial recommendation; what would you like to achieve and when? This is an important exercise and often benefits from a third party helping you tease out your real ambitions.

Then it’s time to look at your business; step back and understand how it is really operating. What would happen if you were not there anymore? What would happen if you were there less frequently?

If you’ve created a business where only you can do all the difficult work, some challenges lie ahead. Getting the right team in place, that you trust, is the first thing. Then you must train them to make you redundant. That sounds a bit scary at first, but if your team can do all your work, your business has a new level of strength and sustainability. You will have given yourself choices.

These newfound choices include the option to sell your business outright, without an earnout period (earnouts are horrid and rarely work for the business seller). So, your range of choices now extend from carrying on running your business to a 100% sale. Given this position of strength you can make other choices if you wish…and there are many of them.

For today, I’m going to share one idea: an employee ownership trust. This is a method of selling your business to a trust where the beneficiaries are your staff. Why would you do that? Well, there are significant benefits. Firstly, you know who you are selling to, and the process can be carried out at a pace to suit you. Secondly, this is a method that ensures your business can carry on looking after its customers; you are leaving a legacy. Possibly the biggest benefit is the tax, capital gains tax, benefits; there can be zero CGT on your sale to an employee ownership trust (the government wants to positively encourage this).

Succession Plus is a selected 55/Redefined partner offering strategic advice for SME owners who want to consider or manage succession and exit planning. Whether you want to run your business on a part-time basis or plan to move away completely, you can take advantage of expert advice. Contact a Business Planner at Succession Plus today.

There are other benefits as well. One, in the context of what we are talking about today, is that through the process of selling your business to an employee ownership trust, you can structure things so that you can carry on working in your business, perhaps at the level or on a reduced basis.

If you’re new to thinking about employee ownerships trusts, this is quite a lot to consider. As members of the Employee Ownership Association, we are well positioned to either advise you or introduce to people that can help.

The point is you have lots of choices about how you can control the amount of time your business consumes, while at the same time enhancing your personal wealth and finances so that you can enjoy your life outside of business.

By Kevin Harrington, Partner, Succession Plus UK

Strategic Guidance for SME owners

Speak to a Business Planner at Succession Plus

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