Are you nearing retirement? Thinking about what to do with the business you worked so hard to build?

If so, you face some important questions:

Does anyone in your family want to take over the business? Are they qualified in terms of capabilities or licenses?

Should you sell to a third party?

Should you let business taper off and fade away?

It’s important to answer these questions at least two or three years before retirement. The more planning you do, the smoother the handover or fade away will be.

In answering the first question, you might have a number of children, siblings or other relatives interested in taking over your business — particularly if it won’t cost them any money up front. Hopefully, they’re already involved in the day-to-day operations and financial aspects of the business. If they aren’t yet involved, it’s prudent to remedy that situation.

Simply selling or handing over your business to someone could cause problems with relatives who feel shortchanged. If your successor hasn’t invested time and money in the business, how interested will he or she be in guiding the operation through challenging economic and market conditions?

It’s possible no one in your family wants or is qualified to take over the business. Then what? You could sell to a qualified third party or let business wind down. Alternately, you could do some serious succession planning and keep your options open.

In answering the second question, a qualified outsider often constitutes the purchaser of choice — and perhaps only option — for many professional practices. This outsider could already be working for or even be a partner in the business.

There’s an entire area of business services and planning devoted to arranging this type of sale or transfer. To be fair to your heirs and deal with potential tax issues, consider working with a business valuation consultant and possibly an insurance advisor. You’ll also want to involve a business succession planning attorney.

In answering the third question, letting business fade away could offer the most viable approach. If you’re a self-employed contractor, you could be the business. Your clients might be unwilling to deal with someone else. If you decide to wind down your business, let your clients know and offer to refer them to other businesses, consultants or contractors to ensure their needs will continue to be met.

There are other elements involved in planning the ultimate fate of your business. Some of these elements include estate planning, funded succession planning, purchase funding and valuation.

The U.S. Small Business Administration developed a course titled Selling a Small Business and Succession Planning for Small Business. Here’s a link to the free participant guide:

www.sba.gov/sites/default/files/files/PARTICIPANT_GUIDE_SELLING_SUCCESSION_PLANNING.pdf

Note: This column isn’t intended as legal, tax or other advice. Always consult the appropriate professional advisors for this and any other type of insurance, legal, planning or tax situation.