Friends of ours own their own business that is very successful. Last night they announced they are going to take early retirement. They said they are going to have their business partner take over the daily operations and they will be retired. Hey after over a decade of 16 hour days they deserve it. But I was confused....I had a lot of questions but didn't want to pry. Is it common for business owners to "retire" but still own the company? Will the business partner essentially just cut them a check to live on every month? How do people come to such an agreement? It just seemed odd to me, but then again I've never owned or worked for a family business so I have no idea of how all this works.
Thanks!
my dad owned his business for 30 years. He just recently retired about 4 or 5 years ago. He is only 55. But, I know that when he retired, he just went ahead and sold his business to someone else. I have never heard of retiring but still owning a business, but maybe it's possible. I don't really know
My parents own a small business, and my brother helps them run it. It's a very successful business. Gradually my parents will work fewer hours, and my brother will take over completely, but my parents will still take a cut. They are the ones who worked so hard to start up the business, and my brother realizes that. My brother will make more money than my parents at that point, but my parents will be able to retire comfortably.
The partner is probably buying them out. This can work in a number of ways, but most likely, the partner will pay your retired friends a share of the profits over the coming years as payment for his/her purchase. It sounds to me like they're selling off their share of the company to the partner, but maybe I misunderstood?
This type of agreement can be worked out individually and then finalized through attorneys.
I own an insurance agency and I'm the agent. If I choose to expand the agency, I could hire agents to work for me. I would pay them according to how much they sell. I could 'choose' to no longer work, and have them do all the sales for me, at a percentage or salary that is agreed on. I would still OWN the insurance agency, just not work at it any longer. I would make money off the sales of the agents running the agency. Your friends probably did something like this. They are no longer actively "working" but are collecting money by the business partner who is actively working the business. Does that make sense? They don't necessarily have to get a "check every month", if they are retired, they may have invested/saved enough to live on and maybe putting their "share" of the business back into the business or investments. There is no black and white answer for you, they could have come to any kind of agreement as business partners. Hope this helped. =)
By your question it doesn't sound like the owners 'cashed out'. They are simply handing over operation of the business.
I would bet you are correct, they are probably going to collect a check each month.
Several businesses do this that have an established name or reputation, the family name or concept is still on the sign, but the family is out of the picture. The business won't suffer because of the history it has established, but the public is non the wiser.
We own our business and your question depends on a lot of factors.
Yes it can be done and be done successfully. It depends on the business plan and how things have been set up.
In our case, we'd probably sell the company to a private equity firm, agree to stay on a number of months to make a smooth transition then when we are gone, either take a flat fee or flat fee plus a percentage of the business for some time.
It does work and there are several ways for this to happen. 'hopefully your friends will enjoy retirement!
Maybe the partner is buying them out over time. So they will get a monthly check, but it's more like they are the bank, financing his loan to buy the business. My ex-husband's former boss did this when he sold him his veterinary business. He retired and stepped away, but financed the loan so my ex could buy the place.
My husband is in negotiations to manage and perhaps eventually purchase what has been until now a family business. The owner would pay my husband an annual salary, thereby reducing the amount of annual compensation that the owner earns, which right now is a salary to manage the business plus profits. If things work out, eventually my husband would buy the business from the guy and the former owner would live on the profit of the sale of the business. Yes it's common for a small business owner to retain ownership of the business even after he or she stops managing the day to day operations.
My cousin bought my uncle's business after he died ( not his father, his Uncle via marriage). He and my aunt decided on a price and a time frame by which she would receive the total amount and he sends her a check each month and will do so until his 'debt' is paid.
I believe she still owns the building and is therefore also getting rent from them.... but I'm assuming she also has a Mgt. on it. so I don't think that is a profit center for her.
It really depends on the business and how it is structured. My ex's family business has stock that you get paid out of the profits, quite a bit so one could live off of it. Owners also get salaries.
The business I work for, most of our doctors are owners and the owners divide up the profits and they also have salary. If one of them leaves there is a buy out that takes 3 to 5 years to do. So in that time they don't get their salary but they get their buyout.
What I am pretty much saying is when you work for a business you own you are taking a salary and profit. Regardless of structure you lose your salary when you retire but you in some form retain profit and ownership until you are bought out.
Do you owe stock in any company? Maybe through a 401(K)? If so you own part of the company and don't work there. So what is the difference?
Busines owners can set up what ever both parties agree to. It seems that their business partner will be taking a salary because he still works there while your freinds may be getting a return on their investment.
