Many Owners of Small Businesses Don’t Plan to Retire

According to the Wells Fargo/Gallup Small Business Index, 53 percent of small-business owners say they don’t want to retire. That figure comes from a telephone survey of 602 small-business owners in all 50 states.

In 2014, only 66 percent of small-business owners were confident they had enough money for a comfortable retirement, but the latest poll shows that 76 percent feel confident about their retirement funding. Still, many business owners surveyed said they wanted to continue working in some capacity, rather than retire completely.

Challenges for Family-Run Businesses

In family-run businesses, the resistance to the idea of retirement may create some complicated questions about who’s in charge, and to what extent, as discussed in a recent Wall Street Journal article. Interviewed for that article were a 69-year-old CEO/business owner and his 36-year-old daughter, who is the president of the family business. Their different management styles and corporate strategies are sometimes at odds, and the father says he has no plans to retire.

Owners of family businesses should consider creating a legal document that defines the rights and responsibilities of each family member.

The Importance of Succession Planning

According to the Wells Fargo/Gallup poll, only 30 percent of small-business owners had a succession plan. Even when a business owner has no plans to retire, there may still be legal issues that arise, should the owner die or become otherwise unable to continue operating the business.

A succession plan can ensure that the business passes on to someone in the family, or to another designated party. An article in The Balance explains that management and ownership are different roles, so even if a business owner passes ownership of the company to family, another person may be named as the manager, president, or CEO. A business owner may ultimately decide that selling the business is the best solution.

Getting advice from an accountant or financial advisor is an important aspect of succession planning. A succession plan must take into account tax implications, as well as retirement expenses or unexpected medical expenses.

Other Legal Concerns

Most people prefer not to think about their own death, or worst-case health-related scenarios. But when business owners fail to prepare for those eventualities, their families could suffer economic hardship and complex legal issues.

Two legal protections for business owners are living wills and powers of attorney. A living will can specify what should happen in the event the business owner becomes incapacitated – and can even say which doctor is entrusted with determining that the person is incapacitated. A power of attorney agreement designates a party to make financial and legal decisions on behalf of the business owner.

Lusk Law, LLC, has helped Maryland entrepreneurs at every stage of their small business development – from startup to succession. Our experienced attorneys have provided legal counsel and representation to business owners in Frederick County, Howard County, Baltimore County, Baltimore City, Carroll County, Washington County, and Anne Arundel County, and other counties in Maryland, and business owners in Virginia and D.C.

Our team’s experience, in both advising and owning businesses, enables us to anticipate clients’ needs and help them prepare for the future. With over a decade of experience in representing Maryland businesses, we’re ready to offer a consultation concerning your rights. Please call us at 443-535-9715 or fill out our contact form if you have any questions about this topic.

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