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Small Business Dimensions

FALL 2022

Succession planning at all stages

Beyond retirement planning

Succession planning at all stages

For most business owners, especially entrepreneurs who have founded their business, the word succession is inextricably linked with retirement. For that reason there are many myths around succession planning – including the most prominent “I’m not ready to retire.” However, it turns out that no matter what stage of business you are at, it’s never too early to think about succession planning.

Early stage

Exiting a business for an early-stage entrepreneur is somewhat unusual and may be focused at this point on preparing for some type of unplanned exit. Of course, there are a few exceptions to this, most notably Jack Dorsey, one of the founders of Twitter who exited his role in order to let leadership grow into theirs. Business continuity management is the primary focus for this type of early exit.

But the most prevalent early exit is more likely an unplanned one. For that reason, it’s good to have succession contingency plans in place for leadership, as well as life insurance to provide for loved ones. To take a more sophisticated approach, however, making sure there are legal structures in place to protect an operating business is equally as crucial. Wills and even complex estate planning tools often do not cover an operating business.

Protecting an operating business in the event of an unplanned exit achieves two goals. First, it provides a harmonious realignment and ensures value and equity in the company remain intact by reassuring customers, clients and employees that your business will continue to run as usual. Second, it preserves equity and potential income from your business for loved ones.


  • Seek out a professional for life insurance, estate planning and trusts
  • Create an early stage exit plan
  • Talk to an attorney to make sure your business operations are protected


  • Leave succession an unplanned question
  • Rely on life insurance and estate planning to take care of loved ones and protect the operation of your business
  • Put planning off because retirement is years in the future

Middle stage

At this stage you may have a robust business – you’re out of the early or startup period and operations are running smoothly. You may be in a growth phase, possibly acquiring other businesses or expanding by investing in technology or infrastructure.

The middle stage may have a long runway for succession planning. It blends the practicality of having plans in place in case of a sudden, unplanned exit and looking ahead at the course and growth of your business over the long haul.


  • Revisit plans put in place at the start of your business to make sure they’re still relevant
  • Consider your ideal time frames for exiting your business
  • Develop talent at your company who could take over when you decide to exit


  • Put off planning until months before you’ve decided you want to exit
  • Become so focused on day-to-day operations that you lose sight of the big picture
  • Assume that plans you may have had in place five or 10 years ago still apply

Exit stage

In this stage, you’ve decided you want to exit the business you’ve worked so hard to build. You’ve created a timetable and may have a date in mind for exiting that’s one to five years out. Valuation, equity and how you can continue to realize income are top of mind.

But first, how are you feeling?

This stage comes with a lot of emotions. Not only are you attached to a business you’ve nurtured from idea to startup to maturity, you’ve likely got your identity wrapped up in your role as a business owner and are emotionally connected to its history of growth and success.

This phase can be bittersweet – you may feel a mingling of loss, relief, exhaustion or elation. You’ll have gone from the heady days of hope and hard work, through the grind of growth and daily operations, and now you are thinking about giving up control.

Redefining yourself post-exit, whether you are retiring or going on to new ventures, is important. Take some time during succession planning to attend to this normal mix of emotions and think through what the next act looks like for you. This could include passion projects you’ve wanted to pursue but haven’t had the time for, charity work or a whole new business. Careful planning about your life in tandem with succession planning can mitigate a sense of loss and add excitement to looking forward to what’s next.

Key financial issues

The key financial issues you’ll want to work through with your advisors, accountant, attorney and family are many.

How much is enough, after taxes, with plenty left over to fund your desired lifestyle and estate planning objectives. Home in on your lifestyle goals and the associated expenses.

Who will you sell to or pass the business on to? A key employee group, family or third party? What are the tax implications of a sale or transfer?

Will you immediately exit or transition out over time?

Your options

You and your advisor can tap in to strategies that will help refine your plan. Options could include specialized trusts (e.g., revocable living trusts, intentionally defective grantor trusts, grantor retained annuity trusts) and self-canceling installment notes and intra-family loans. Some assets will require more legal coordination to handle properly during the legacy planning process, such as real estate, intellectual property, and certain types of stock, business partnerships and promissory notes. Your advisor can help you understand the advantages and considerations of each.

Together, you’ll also want to think through how to provide an inheritance for a child who is unwilling or unable to be active in the business, as well as your plans should you have to leave the business before you’re ready (e.g., disability, divorce, distress or disagreement).


  • Acknowledge the emotional side of leaving your business
  • Plan for what’s ahead post-exit
  • Talk with your trusted team about your goals – and how you reach them


  • Assume that exiting your business will come without a mix of emotions
  • Rely on last-minute planning to see you through this phase
  • Go it alone

Next steps

  • Consider talking to your advisor about succession planning – no matter what stage you’re at
  • Look at your business plans for the next five, 10 and 15 years – where do you want to be and when?
  • Start visualizing life after your exit

Raymond James and its advisors do not offer legal or tax advice. You should discuss any legal or tax matters with the appropriate professional.


What diversity means for your business

Employee diversity is more than a moral obligation – it’s also a valuable resource

What diversity means for your business

There’s a lot of buzz right now about “DEI” initiatives – which stands for diversity, equity and inclusion. But what you might not know is that there are actually different types of diversity, and each one has its own benefits.

The bottom line

Let’s look at why diversity overall is beneficial to the bottom line. As with any system, a wide variety of skills and viewpoints tend to strengthen an organization. This cognitive diversity is important in driving innovation, higher revenues and better decision-making, and – very important in today’s talent wars – it creates a wider talent pool to draw from. In fact, diversity can drive up to a 60% improvement in decision-making. Public companies in the U.S. with diverse executive boards have been shown to have a 95% higher return on equity than non-diverse boards, and companies in the top quarter for gender diversity were more likely to have above-average profits. Companies in the top quarter of ethnic and cultural diversity outperformed those in the lowest quarter by 36%.

With these kinds of numbers, diversity is quickly becoming table stakes for companies who want to excel, innovate and outperform in their respective industries.

Types of diversity

There are four different types of diversity in the workplace. Your business may already encompass some of them.

First, there is what’s called internal diversity, comprised of dimensions of diversity that people tend not to see on the surface. This type of diversity corresponds to the circumstances into which a person is born. It can include an employee’s sense of self as well as their marital, parental, veteran status, education level, political affiliation. It might also include non-visible physical disability or limitations, gender identification and sexual orientation, among others. These aspects are also protected by federal employment law.

Then there is external diversity. These are demographic categories that are the most visible. For instance, race, gender, disability, height/weight, or age.. Many of these factors dovetail very closely with internal factors.

There’s also industry and experience diversity. These categories might include management status, union affiliations, job functions, seniority and different departments within the company. Looking at diversity through the lens of each department and at each level of management is a good way to track diversity within your company. Having people with professional experience from a variety of industries can prove beneficial when it comes to innovation, should they have the proper transferable skills.

Finally, there is cognitive diversity. This can encompass someone’s outlook on life, their political beliefs, their knowledge of history, and how influenced they are by cultural events. Diversity of thought allows for fresh perspectives to best solve complex issues and plan for future growth and longevity of the business.

Diversity isn’t just a “nice to have” anymore. Actively pursuing different kinds of diversity can help you map a course to increasing diversity – and potentially your profits.

Next Steps

  • Take a look at your current employees through the lenses above – you may have more diversity than you think already
  • If you’re currently hiring, consider how recruiting diverse candidates might increase your talent pool
  • If you’re interested in increasing diversity at your company, reach out to your advisor about ideas on where to begin


Is a solo 401(k) right for you?

How to determine if this unique retirement vehicle makes sense

Is a solo 401(k) right for you?

The solo 401(k) is a retirement vehicle that gained a lot of momentum in 2001 when the IRS made it much more flexible for business owners. It’s a vehicle that has a lot of great advantages – but you must meet certain requirements to deploy it. Here’s a look in more detail.

How much can I contribute?

A solo 401(k) allows you to make a contribution both from your salary and from your business. This allows you to maximize your retirement savings, reduce your tax burden and catch up on contributions if you are over 50. For your salary, you can contribute up to 100% of your compensation, provided it doesn’t exceed $20,500 for the year, and you can contribute an additional $6,500 for a total of $27,000.

You, as the business, can contribute up to 25% of your compensation, or no more than $61,000, plus a $6,500 catchup contribution for a total of $66,500.

Choose your tax advantage

Pick a traditional 401(k) to reduce your income in the year your contributions are made, or go with a Roth 401(k), which doesn’t get you an initial tax break but does allow you to withdraw the funds tax-free in retirement. If you think your income will be higher in retirement, the Roth can be a good move. If you think it will be lower, then take the tax break now.

Not just for sole proprietors

Solo 401(k)s are for business owners – and not just sole proprietors. You are eligible if you have an S corporation, LLC or partnership. The caveat here is that only the actual business owner or their spouse (if they too are employed by the business) are eligible.

Other advantages

The solo 401(k) offers some administrative advantages over a regular qualified retirement plan. First, unless your balance exceeds $250,000, you do not have to file a 5500 form every year with the IRS. Second, you do not need to perform nondiscrimination testing, which is a compliance regulation from the IRS that usually requires a plan administrator. And, finally, you may be able to take a loan from your solo 401(k) of 50% of the balance (greater than $10,000) or $50,000 – whichever is less. 

Setting it up

Talk to your advisor about setting up a solo 401(k). You’ll need an employee identification number, and you’ll sign a plan adoption agreement. Once it’s set up, you can start contributing into vehicles like ETFs, index funds, mutual funds and more – whichever make sense for your long-term financial and retirement goals.

Next steps

  • Consider if you meet the requirements for a solo 401(k)
  • Determine if this might be a good fit to reduce your tax burden for 2022
  • Talk to your advisor about how to set it up


401(k) plans are long-term retirement savings vehicles. Withdrawal of pretax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty.

Raymond James does not provide tax services. Please discuss these matters with the appropriate professional.