Morgan Law Group

  September 2, 2013 
What is your exit strategy? 

"Build your business with an exit strategy in mind." 

By: A. W. Morgan

Business owners get caught up in the process of starting and running a business, but overlook an important part of the planning process – developing an exit strategy. What to do when there comes a point in time that the business owner and the business must part ways.

This event could be voluntary, in the case of a sale of the business, or involuntary, in the case of the death of the business owner. In either event, the business owner must have an exit plan.

So what is your exit strategy? How will you, as the business owner, transition out of this business in the future? This decision making process must take into account the various reasons why an exit strategy for a business may be necessary. Here are a few:

(a) Retirement: Not everyone wants to continue working in their business until the day they kick the bucket. And, even if you do, there is no guarantee that you will be physically or mentally able to continue operating eth business as you mature in age. 

(b) Change in Interest: There may come a time when your heart is no longer in the business. You may be looking for a change of life style, to relocate or to pursue other interests.

(c) Death or Illness: You may feel a commitment or obligation to your employees to keep the business going if something happens to you. You may also need to plan for your family’s security, especially if you are the primary or sole breadwinner.

(e) Succession Planning: You may desire to leave the business to a family member, as part of your estate plan, or to your employees for their years of service.

Now that you have an idea of the reasons why you may need an exit strategy, let’s consider your options. Here are the various types of exit strategies that a business owner can employ:

(a) Sale of the Business: The option that usually presents the greatest value to a business owner is the outright sale of the business.

(b) Bringing on a Partner: For long term succession planning you may consider bringing on a partner who could then buy you out when you are ready to leave the business.

(c) Family Transfer: You may be considering passing on the business to your offspring. The transfer of the business to a family member may have estate planning tax benefits and should be considered in your overall estate plan.

(d) Selling to an employee stock ownership plan (ESOP): This approach can provide many benefits, including, incentivizing employees by giving them an ownership stake in the business, provides certain tax savings to the business owner and can be an excellent transfer mechanism for turning the business over to a group of key employees.

(e) Liquidating the assets by way of an asset sale:While this is usually the simplest option for winding up a business, it often yields the least return to the owners because there is no value given for the “going concern” or goodwill of the business. This is usually the option used where the business is dependent primarily (if not solely) on the efforts of the owner and cannot be transferred easily. However, in this instance a plan could be developed to groom a successor who would be eligible to acquire the business in the future.

Let us help you with your exit strategy. We can discuss the various options with you and develop a long term plan that will enable you to feel secure, knowing that you have thought ahead and have measures in place to address this issue.

The Morgan Law Group is a full service corporate transactional law firm located in Gwinnett County Georgia near the City of Lawrenceville. We provide legal transactional advisory and support services to individuals, business owners, corporations, partnerships and government agencies, primarily in the areas of general corporate, business law, contracts, business and asset sales and purchases, mergers and acquisitions, joint ventures, corporate finance and real estate law. 

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