You've finally hit the milestone many business owners anticipate for years: You've sold your business. This event may leave you with the largest financial windfall of your life. So what should you do with the money you've earned?
How you handle this influx of cash is important. After all, you may need to use the money to cover your living expenses for years to come or to fund your retirement.
Here are the key steps to take to help you figure out what to do after selling your business.
1. Take your time
You don't have to decide how to deploy your money right away. It's reasonable to park your proceeds in a simple savings account or in certificates of deposit (CDs) for a few months, or even up to a year. Doing so can buy you some time to work out your long-term investing and saving strategies.
If you haven't already done so, this is a good time to assemble a professional team that can help you make smart financial decisions. Helpful team members may include an attorney, an accountant or a tax professional and a financial planner with expertise in wealth, retirement and estate planning.
2. Tackle your tax plan
Depending on the legal structure of your business and how you sold it — whether with cash upfront, payments over time, stock options or some other method — you may have to pay a fairly significant business tax bill Opens in new window. Your financial team can help you explore ways to invest your money in retirement or other types of accounts to minimize your tax burden. They can also help you decide how to best structure your tax payments.
3. Review your personal spending plan
It's important to determine how much you need to withdraw each year from your business proceeds now that you're no longer taking salary draws. Be sure to include any expenses that you previously ran through your business, from cell phone plans to insurance premiums.
Once you've identified your spending needs, financial and tax planners can help pinpoint how much of your business proceeds you'll need to maintain your lifestyle. You may want to invest the rest of your proceeds for a longer-term goal, such as retirement.