If you’re a business owner wanting to retire from your business, there are many important decisions you need to consider in regard to the future of the company. Retiring from business can be a hard situation to navigate. In this blog, we will list the different options you could take if you’re looking to retire from your business and allow you to finally take a step back in ease into a more leisurely life.
Sell the business
One of the more obvious options would be to sell your business if you wish to retire. Subject to any shareholder agreements, you can see all shared in the company and cede ownership to a third party. Another alternative to completely selling the business could be stepping back from day-to-day responsibilities and selling a majority stake in your company. This would then allow you to hand over control of the business to the buyer and they will become your company’s new managing director.
Sometimes, when it comes to stepping down, this will involve resigning as a company director. Although it is possible to decide to carry on as a ‘sleeping’ director whilst you hand over the responsibilities. Additionally, you could draft a new managing director to run your business which can involve giving them a stake in the company.
Phasing out
If your business is a family business, you’re likely to have the option of handing the reigns over to your children, however, this can take several years of training etc. In a family business, transfers of shares are much less important as the control of your business will be staying within the family.
In a non-family business, there may be a process of phasing out control. This may be by handing over more executive control to another director who may be a joint owner too. This process may also involve selling shares to the relevant business partner.
No matter the scenario, there will usually be a longer time frame for the overall retirement process. If you decide to retire, you will likely be actively involved in training up your replacement to ensure they are fully equipped to run your company as effectively as possible.
Liquidation
If selling your business is simply not an option, you may be considering voluntary liquidation. Members’ Voluntary Liquidation (MVL) is the term used for the liquidation of a company where the owner wishes to retire and has nobody to take over. Although MVL is an expensive option because you do need to appoint a liquidator, it can be a much more tax-efficient way to retire from your business. Any proceeds that are extracted from the company would be treated as capital distributions as opposed to income distributions. So, taking money from a company via MVL will be subject to less tax than extracting money through dividends.
If you’re looking to retire and don’t know where to begin, we can help! Book your FREE discovery call today.
