Protect Your Proceeds
The most important step you should take after successfully selling your business is to protect the proceeds. Here are three ways to do that:
Diversify Your Holdings
If you received cash from the sale, immediately consider a diversification plan for the proceeds. Think about a combination of mutual funds, municipal bonds, money market accounts, and real estate. Your particular diversification plan will depend upon the amount of proceeds, your other assets, and your age. Think about hiring an experienced financial planner to guide you through the process.
Hedge Your Bets
If you received stock instead of cash as a result of the sale of the company, immediately determine the best way to hedge against a downside on the stock you receive. There is no worse feeling than walking away with what you think is a significant return, only to see it evaporate when the stock you received starts to plummet. And this has happened to plenty of people. Start planning your hedge strategy even before you close the sale of the business. Enlist the help of a knowledgeable stockbroker or financial planner.
Review Your Liability Protection
Now is the time to review what exposure you have to liability. After all, you now have significant assets that someone could go after. Make sure you have adequate primary and umbrella insurance coverage. Analyze whether you are exposed to personal financial risk in any other businesses you own—for instance, if you are involved in general partnerships or sole proprietorships—get out of those quickly by incorporating or forming an LLC. Incorporation can ensure (if done properly) that the entity, rather than you personally, is liable.
If you don’t already have a Wealth Management Professional, we will be happy to refer you to one of our trusted partners. Just ask us!
By: Richard Harroch, All Business
