Pension as an Entrepreneur: Stop or Transfer?

As an independent entrepreneur, it's crucial not to approach your retirement unprepared. There are numerous aspects that must be arranged beforehand, including fiscal, legal, economic, social, and financial matters, both business and private. Preparing your business well is key to a successful transfer, whether for a sole proprietorship or a corporation. That's why we present "Think Ahead-Business Transfer" - specially designed for entrepreneurs who want to look ahead.

1. Discontinuation after retirement

If you're not interested in continuing the business and there's no suitable successor, discontinuation might be an option. However, even in case of a discontinuation, several well-considered decisions must be made in advance.

Do you have employees? Make sure to give timely notice. Otherwise, you owe a severance payment upon closure (depending on the status and number of years, this could equal several years of salary).

Do you have a commercial lease? Even if you close your business, you're obliged to keep paying the rent until the next maturity date (most commercial leases follow a 3 - 6 - 9 structure).

Are there outstanding credits or obligations to suppliers or public authorities (tax, VAT)? Remember that debts remain even after the closure of a business. In liquidation, all assets (inventories, machines) are sold to pay off debts.

2. Business Takeover

Transferring your business to a suitable successor can be a good option if you want your life's work to continue. It can also be financially advantageous, as you might receive compensation for the transfer. When transferring shares, outstanding debts may be taken over by the new shareholder. When selling the business, the sale price should be sufficient to pay back all outstanding obligations with the proceeds.

We identify four important segments in the transfer of small businesses:

1. Transfer to children or heirs (occurs in less than half of cases). This can be via gift or sale or both.
2. Transfer to staff (= niche market).
3. Transfer to a competitor, customer, or supplier (= within entrepreneur's network).
4. Looking for external buyers (= main target for Overnamemarkt.be).

Important factors to consider when determining whether you want to have your business taken over or choose an immediate discontinuation or liquidation include:
• Is there interest from potential buyers?
• Are there suitable candidates within your network or family?
• Are you willing to provide some support to new operators after the transfer?

It's advisable to seek professional advice from an expert takeover advisor. They can help you estimate the required time and draw up a realistic timeline based on your situation.
For small businesses valued at under €500,000, UNIZO Overnamemarkt offers a specific guidance program with VLAIO support https://www.overnamemarkt.be/nl/adviesopmaat

3. How early should you prepare for retirement?

Think ahead. It’s wise to prepare well in advance by making an action plan for a smooth transition from your business to retirement.

Though there's no fixed timeframe that applies to everyone, it's generally recommended to allocate at least 1 to 2 years for the entire business transfer process. This gives you ample time to plan carefully, identify potential successors, and ensure a smooth transition.

The duration of the process may vary depending on several factors, such as the complexity of your business activities, the size of your enterprise, and the specific requirements for business transfer in your industry.

Here are some considerations to help you plan the timeline:

1. Preparation: (several months)

It's advisable to start planning the business transfer well in advance. This allows you to take necessary steps such as evaluating the value of your business (choosing steps to increase value or shedding elements like real estate or excess cash to make the takeover more feasible). Putting all administrative and legal matters in order and identifying potential successors is the first step.

2. Finding a suitable successor (3 to 6 months)

If you choose a transfer to a third party, you will need to identify potential candidates, advertise the business for sale through appropriate channels, conduct talks, and negotiate agreements. Even if you prefer a successor from your network or family, negotiations with multiple parties may be required.

3. Support after the transfer

It's important to take enough time to ensure a smooth transition. This includes transferring knowledge and experience to the new owner and ensuring the retention of staff skills and know-how, supplier, customer relationships, and other operational aspects.

Remember, planning a sufficiently long timeline will give you peace of mind that everything is well arranged before you retire. A solid "plan B" (stopping or liquidating if no buyer is found) can help to manage stress during this period.

4. What if there are problems?

It's understandable to wonder what happens if you haven't completed the business transfer by the time you retire. In such cases, there are a few options to consider:

1. Continue working

If you haven't completed the transfer but wish or need to continue working post-retirement, you can choose to continue operations in a corporate form (VOF or others) until you find a suitable successor.

2. Discontinue

If you're not interested in continuing the business and there's no suitable successor, discontinuation might be an option.

3. Bring in external help

If the transfer can't be completed on time, consider bringing in external help, such as an interim manager or possibly a working partner. They can help manage daily operations and eventually complete the transfer.

4. Postpone the transfer

If you're still interested in transferring your business but can't complete it before retirement, you may opt to postpone retirement and continue working until the transfer is finalized. This ensures your business's continuity and proper transfer.

Remember, every situation is unique, and the best approach is to seek professional advice from your social secretariat (Liantis). They can help assess your circumstances and guide you in making the right decisions.

Think ahead!