I come across lots of Baby Boomer Entrepreneurs that are starting to face the question about their retirement and business continuation. These folks are often bummed out because they believe that their business is going to die with them because they’ve never started to build up their business like a true entrepreneur; they’ve just been the “technician” doing the work for themselves.
I’m arguing that entrepreneurs, especially self-employed folks, need to incorporate their business and start doing the hard work of working “on” their business, so that it can be the asset to the family that it deserves to be.
WOrk on your business so that it can be the asset to your survivors that it deserves to be.
Three Advantages of Transforming your Self-Employed Gig to a Corporation
1. It Becomes an Asset.
If you simply stay as a self employed sole-proprietor and never take the time and energy to incorporate, your business will die when you do. But if you’ve done the hard work to build a corporate structure, your survivors can benefit from it in different ways. A surviving spouse might want to sell the company name, the website, client list, or maybe just hire staff to run it for them. The bottom line is that when you’ve built your company as a corporation rather than just a sole proprietor, it can become an asset to your family after death.
2. Your Kids and Grandkids Can Join You. If you’re smart, you’ll get some of your most precious family members involved in your business at a young age. You can instill a work ethic, shift over tax-efficient wages, empower them to invest in a Roth IRA really early, or position them for leverage in your business later on. The bottom line is that inviting your kids and grandkids to work in your business provides some awesome tax planning opportunities and builds their competencies, experience, and perspective.
3. It Can Pay Dividends. If entrepreneurs do a good job of identifying, hiring, training, developing, and inspiring the right staff, while building a great system and culture, the business might take off! Remember that company stock is a great legacy to leave as a financial legacy, and it can literally pay dividends for decades – or centuries – to your heirs.
If your not quite sure about whether you want to give your company stock to your heirs, talk with a lawyer to discuss the different options for trusts to put some guard rails and conditions around the stock. Just remember that there’s no reason why your small business today can’t be a thriving powerhouse 100 years from now.