Succession Planning/Retirement Requires Advance Planning… don’t put it off
I fully confess to not being an enthusiastic winter person. So, it is not surprising that as I watch the first snowflakes of the season falling, my thoughts immediately leap to sticking my feet into the sand on a secluded, tropical beach. Winters in a warm climate; that’s a common daydream when envisioning retirement.
For many people, retirement means attending their farewell party then heading home to enjoy their new-found freedom funded by a good pension. But for those of us who own our own businesses, the road to retirement can be an uncertain and confusing one. How can you transform those years of hard work and accumulated equity in your business into a pension fund? It is at this point that the complexities and confusion can become overwhelming. The reality is that if you don’t have a succession plan in place this could leave you dangerously unprepared for retirement, or even disability or death.
A Well-Funded, Relaxing Retirement Doesn’t Just Happen… It Takes Planning
A succession plan is a must for every small business owner who wants to protect their years of hard work and dedication to their company. Don’t put it off – it is good, responsible business management. The first step in creating your succession plan is to think about the future of your business. Do you see your business: providing you with a retirement income, being passed onto your children, or being sold to a third party?
So, what is a succession plan? A plan should determine how your business will ultimately be transferred in various scenarios and detail the steps necessary to prepare for each of those transitions – because we can’t predict the future, but we can prepare for it. If done properly, your plan should map out the path to your retirement and address the scenarios of your sudden death or profound disability to ensure your wishes are carried as you want them.
As any business owner knows, the reality is that the financial management of their company is indeed separate from their personal financial side, but the two are intensely connected. Consequently, it is necessary to view your business succession planning as an extension of your personal estate planning but with the twist of looking at it through the lens of the future operations of your business. Depending on the future you envision for your business, your plan must be sculpted accordingly:
Are my business and family protected in the event I should become disabled?
What happens if I should die suddenly?
What happens to my business when I am ready to retire?
What is the best path to get the kind of retirement I want?
What are the tax implications of each scenario?
Are there ways I can start building a bigger retirement nest egg?
How and when can I start preparing for a financially secure retirement?
Consider these questions carefully. As you enjoy the upcoming Christmas season with cherished family, friends and employees, remember your planning protects all of them as well. So, give yourself and them the gift of making the commitment to begin your succession planning with the arrival of the New Year. Then go, relax and relish the magic of the season knowing you’ve done something good.
In the New Year I will have more tips on succession planning so keep an eye open. If you are eager to get a jump on it sooner drop me a line. I am also considering running Succession Planning workshops to help clients get started on the planning path – let me know if that’s something that would interest you.
All the best of the season,
If you would like to speak to us regarding your retirement or tax planning, tax returns, bookkeeping or any of your other accounting or financial planning needs, please contact us anytime – we’d love to chat with you.
Kelly Melanson Professional Corporation – Chartered Professional Accountant, CPA 11 Stanley Ct, #13 Whitby, ON L1N 8P9 – (905) 666-5071 Toll-free: 1-800-942-5558 – Email: firstname.lastname@example.org