Despite the global economic turbulence of the past three years, Ireland’s economy is still growing.

Indeed, an Irish Times report, published in July 2023, reveals that the Irish economy is set to continue growing this year, albeit more slowly than in previous years.

As a business owner, you too might have felt the effects of the past few years’ economic volatility on your company.

But as we emerge out of this difficult period, you may feel more optimistic about the longevity of your business, and could be exploring options that might help secure its legacy. One such option is selling your business upon retirement.

Of course, a business sale may be the biggest capital event of your life – so it’s understandable that you might feel totally overwhelmed by the prospect. Yet crucially, without expert-led preparation, you could find yourself overwhelmed by this sudden injection of wealth.

So, here are three often-overlooked ways that a business sale could affect your personal finances, and how we can help you prepare for them.

1. A business sale could play a huge part in funding your retirement

Whether or not you’re relying on the sale of your business to fund your retirement, this amount of wealth could transform your later-life plans.

You might have been making pension lodgements if you paid yourself a salary, meaning that the funds from a sale could supplement, rather than make up the entirety of, your retirement fund.

On the other hand, you could have been relying on money from a sale for a stable retirement – in which case, considering how much you may receive, and whether this is enough, is essential.

With all this in mind, it’s crucial to calculate your “number” before selling your business. Your number is how much you would need to support yourself through retirement and achieve everything you desire, without running out of money in the process.

If you’re unsure where to begin with calculating your number, working with a financial planner can help you use your current circumstances to project how much you might need. Once you have an idea, you can then look at whether the money you take from selling your business is likely to match or exceed this sum.

Combine the prospective capital from a sale with your personal pension wealth, and any other saving and investments you may have, and you can discover whether your ideal retirement is affordable.

It’s important to begin thinking about how a business sale could fund your retirement before you agree a sale. Doing so can help you put plans in place to manage this amount of wealth throughout your later years, without incurring the additional stress that a sudden injection of capital might cause.

2. You could pass funds from a sale to the next generation

Once you’ve sold your business and put enough money away for a comfortable retirement, you may want to leave a portion of your wealth to the next generation.

Now or in the future, the sale of your business could help the next generation to:

• Climb the property ladder
• Pay for education
• Fund a wedding
• Create a retirement pot.

Importantly, there are a number of key decisions to be made when using the funds from a business sale to provide wealth to the next generation. One such choice is whether to pass this wealth on directly after a sale, or to leave it as an inheritance later.

Deciding on this topic as early as possible could be hugely constructive.

If you plan to transfer some of the wealth to a child or grandchild as soon as you receive it, you can plan for this transaction (and any tax liability it could incur) with the help of a financial planner.

Conversely, if you decide to leave some of the wealth as your legacy once you pass away, a financial planner can help you invest it on behalf of the next generation.

Whatever you choose, factoring your loved ones into your sale strategy could help you and your family create a wealth plan in advance, and subsequently action it when the time comes.

3. Selling your company could incur a Capital Gains Tax bill

A third essential factor to consider when selling your business is your personal tax liability.

While there are some reliefs available, including Entrepreneur Relief and Retirement Relief, you could pay Capital Gains Tax (CGT) if the market value of your business exceeds the relief you can claim.

If you don’t prepare for this eventuality, you could be caught off guard by a bill that skews your retirement and inheritance plans after the sale goes through.

This is where working with experts in the run-up to a company sale can be hugely constructive.

Alongside a tax adviser, a financial planner can help you and your family prepare for the financial impact of a sale – both positive and negative – and will remain by your side before, during, and after the transaction is completed.

Get in touch to learn how a financial planner can help you manage the personal side of a business sale

With tax, inheritance, and retirement planning all wrapped up in the sale of your business, it’s vital to have an experienced financial expert on your team.

Here at iQ Financial, we work alongside business owners to ensure that they and their families can benefit from the sale of their company. We can help you protect the legacy you’ve built and form a robust plan for this next chapter in your life.

To find out more, email us at clients@iqf.ie, or call 353 71 915 5560.

Please note

This article is for information only. It does not constitute advice.

It describes financial planning services that iQ Financial can offer to you. Financial planning services are not regulated by the Central Bank of Ireland.

iQ Financial is not a tax adviser and tax advisory services are not regulated by the Central Bank of Ireland.