Steps to a successful business transfer:
Step 1 – Align Family Goals
A successful transfer involves understanding each generation’s goals.
Step 2 – Evaluate the Senior Generation’s Liquidity Needs
An evaluation of the senior generation’s future income needs should be conducted prior to structuring the transition
Step 3 – Analyze the Company’s Finances
The business’s historical financial performance provides insight into what the company can handle in terms of a transaction as well as a range of values for the parties to consider a transaction.
Step 4 – Evaluate Transfer Methods
Here we evaluate which path(s) to pursue in the ownership transition.
Step 5 – Evaluate and Analyze the Tax Structure
The transfer methods will dictate the tax consequences to the senior generation, the next generation, and the company all need to be evaluated.
Step 6 – Develop a Buy-Sell Agreement
In situations where the business will transfer to more than one owner, developing a buy-sell agreement is of great importance.