Tennessee business owners like you dedicate some estate planning time to your business. After all, you must plan what will happen to it after you let it go. This complex process includes figuring out how you want to transfer business ownership.
You have many options available to you in this regard. You can look through each for benefits and drawbacks to decide which works best.
Five common ways to transfer businesses
According to Fit Small Business, there are five common ways to transfer your business ownership. This may come into play after you pass on or if you end up too disabled to work. You may have a retirement plan instead, though. This means that the business gets passed along while you are still alive. But you retire and no longer retain ownership or control of it. The five most common ways in which you can transfer your business are by:
- Key employee
- Outside party
Which method is best for you?
An heir is a family member that you pass the business along to. Many businesses stay in families for generations. They garner a solid reputation through this line of inheritance. This method cuts out a lot of the legal complexities and surprises other methods have. But it can get complex if multiple family members have an interest in taking over.
Selling to a co-owner or key employee has similar benefits and drawbacks. On one hand, they are already immersed in company culture. They understand how your business works. They likely also know your visions for the company. On the down side, buy-sell agreements can cost a lot.
Selling back to the company or to an outside party avoids many financial burdens. But you cannot predict how the new owners will run the business, either. This is often enough of a deterrent if you are particular about how you run things.