For most business owners, retirement is either a subject they welcome or the last thing they want to think about. If you’re looking forward to that day, you’ve probably already started preparing to move on from your business. 


Many privately held companies reflect the people who’ve built them. In some cases, the owner is the business.


If you conclude that the company is viable without you there to run it, your next step is to get an accurate valuation of its worth. That is essential not just for  sale, but also in consideration of taxes and to help you gauge how much retirement income you might expect. A professional valuation and tax expert can help you look past your emotional attachment to the company, gauge its true value as well as the market for such a business, and arrive at a realistic number.


What Are Your Retirement Income Needs?


If you are planning on selling your business, you should determine how much income you will need to support your lifestyle and retirement goals, and what portion of that will come from the sale of the business compared with your investments and other assets. Keep in mind, too, that merely matching your current salary in retirement may not be enough if the business has also been paying for things like health insurance, car leases, club memberships and tax preparation – expenses that you will have to cover yourself.


Even after receiving a lump sum from a sale, many former business owners can stay involved and earn income by serving on the board of directors or consulting. You might even continue helping out in day-to-day operations in a reduced but vital role such as serving clients who’ve been with the company for years and are used to working with you.


If you own an office building or other physical assets, another option for generating retirement income is to retain those assets and lease or rent them back to the business. Such arrangements need to be agreed upon beforehand and spelled out clearly in the formal transfer or sale agreement with the new majority owners.


Bear in mind that there are very real advantages to beginning to prepare for it now.


Taking the time to plot your company’s future can ensure that you leave on your own terms. It also puts you in a better position to retain control, at least during any transition period. So that proceeds from your business -which in many cases are your biggest asset- have the greatest potential to provide you with a strong, steady retirement income.


How can you supplement Retirement Income?

If the proceeds from the business (sale of the business, physical assets, etc.) aren’t sufficient to cover retirement expenses, there are proactive steps that can be taken today to help reach the future you want, as well as increase employee satisfaction and retention. The first step is to have a conversation around the various Small Business Retirement Plan offerings to see which benefits best suit your employees, business, and yourself.


Small Business Retirement Plan offerings

  1. Small Business 401(k)
  2. SEP IRA


Contact Merrill for assistance in choosing the correct Small Business Retirement Plan for your business.


Merrill, its affiliates, and financial advisors do not provide legal, tax, or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions.  Merrill Lynch, Pierce, Fenner & Smith Incorporated (also referred to as “MLPF&S” or “Merrill”) makes available certain investment products sponsored, managed, distributed or provided by companies that are affiliates of Bank of America Corporation (“BofA Corp.”). MLPF&S is a registered broker-dealer, Member SIPC and a wholly owned subsidiary of BofA Corp.  Banking products are provided by Bank of America, N.A., Member FDIC and a wholly owned subsidiary of BofA Corp.


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