5 Actions to Set Up Your Business With Your Exit in Mind, From a Wealth Adviser

When you're launching a business, it may seem counterintuitive to begin with your exit in mind. But planning ahead will put you on a more secure footing in the long run. When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works. Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.You are now subscribedYour newsletter sign-up was successfulWant to add more newsletters?Delivered dailyKiplinger TodayProfit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. 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"Begin at the beginning," to quote the King of Hearts from Alice in Wonderland. That's how most people approach business ownership, and on its face, it seems like a smart strategy.We all know the sobering statistics on entrepreneurship: According to the U.S. Bureau of Labor Statistics, about 21% of businesses fail in the first year, nearly 50% fail by year five, and about 65% fail within 10 years.So to avoid becoming a statistic, most entrepreneurs focus primarily on the first five years (launching their business, securing funding, building operationally and scaling). But it would be a mistake not to also think about preparing for a potential exit.Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special IssuesProfit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.Profit and prosper with the best of expert advice - straight to your e-mail.What is your exit? Do you plan to sell the business, pass it to a family member, partner or employee or dissolve it?While you might not readily know the answers to these questions, by following the five best practices below, you can both build your business and put yourself on stronger footing when the time comes to begin your next act.Often, business owners are good at what they do but need help on the financial side of running a company. If you want to eventually sell or transition your business, you will want to make sure everything is above board.About Adviser IntelThe author of this article is a participant in Kiplinger's Adviser Intel program, a curated network of trusted financial professionals who share expert insights on wealth building and preservation. Contributors, including fiduciary financial planners, wealth managers, CEOs and attorneys, provide actionable advice about retirement planning, estate planning, tax strategies and more. Experts are invited to contribute and do not pay to be included, so you can trust their advice is honest and valuable.It is important to have a trusted executive — whether that's a CEO, CFO, outside accounting firm or even a fractional CFO — who can guide you in the day-to-day bookkeeping of your business, making sure you have proper cash flow and the right people in place.Clean and transparent financials are critical to maximizing valuations. Unfortunately, I have worked with business owners who were not focused enough on the operations and finance side of their businesses and eventually found that employees were embezzling funds.If you do not have a strong background in business accounting, make sure you bring on trusted, experienced people early who can set you up for success and keep it running smoothly as you grow.When setting up a company, you can structure it as an LLC, C corp or S corp. There are different tax advantages to how you structure your business.For example, if you are registered as an S corp through an LLC, you can give yourself a salary through the company and set up a solo 401(k) to maximize tax advantaged retirement savings.You can also structure the company to support your retirement goals in additional ways.For example, if you set your business up as an LLC, you can take out a private-placement life insurance policy through the business, which will allow you to protect and grow your assets tax-free.3. Know when to scale your businessA business cannot rely solely on the person who founded it. Make sure you are creating a repeatable business model, which will add value to your eventual selling price.For obvious reasons, very few buyers are interested in purchasing a business that will stop functioning if you no longer work there (unless they are buying your clients or buying you to stop you competing with them).Therefore, to maximize valuation, you need to put in place the team and processes that allow the business to effectively function without you.Hire an attorney to help you on the planning side, but also with setting up trusts, taking out insurance, filing patents and all other important legal matters.Looking for expert tips to grow and preserve your wealth? Sign up for Adviser Intel, our free, twice-weekly newsletter.Where applicable, legally controlling and protecting the intellectual property of your business may also directly increase the value of the company.Beyond your five-year growth plan, think about 10, 20 or 30 years down the road. Do you want to cash out completely or make a partial sale? Do you envision yourself working part-time in retirement or being fully retired?Of course, your answers may change over time, and that is okay. Financial planning provides a road map and should never be set in stone.By working with a financial adviser, you can create a strategy while also adjusting if your goals change over time.Entrepreneurship is about being in control of your own life. When you are building a business, think about the full lifecycle — launch, scaling and eventual exit.If you "begin at the beginning" but also think about where you want to land, you will be creating a road map to achieve not just your business goals but your vision for your life.This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.With a varied background in the financial services industry, Jamie is a Wealth Adviser who works closely with clients to develop a comprehensive approach to managing wealth and devising tailored initiatives to help them pursue their goals, address their concerns and act on their long-term aspirations. Prior to joining BRPW, Jamie was a financial adviser at Merrill Lynch Wealth Management, where she worked with high-net-worth clients to create financial strategies to match their needs and goals. Knowing how to deal with a disagreement can improve both your finances and your relationship with your planner. How to find a getaway that suits your style. A weakening dollar and lower interest rates lifted international stocks, which was good news for one of our favorite exchange-traded funds. Knowing how to deal with a disagreement can improve both your finances and your relationship with your planner. How to find a getaway that suits your style. A weakening dollar and lower interest rates lifted international stocks, which was good news for one of our favorite exchange-traded funds. No stock is completely safe, but we can make educated guesses about which ones are likely to provide smooth sailing. If you miss your RMDs, you could face a hefty fine. Here are four ways to stay on top of your payments — and on the right side of the IRS. The administrative requirements following a death move quickly. This is how to ensure your loved ones won't be plunged into chaos during a time of distress. AI is becoming a standard investing tool, as it helps cut through the noise, personalize portfolios and manage risk. That said, human oversight remains essential. Here's how it all works. Caterpillar stock has been a remarkably resilient market beater for a very long time.