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I have been in business with my Father for the last 10 years. He established the business 35 years ago. He would like to retire however we are in a delicate situation regarding his “retirement payout”. Does anyone have any advise on how we should go about this and what a respectable payment amount (%) and structure would be?
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This question is directed at Ed Hatton. Thank you for your response to my question regarding my Father's retirement. Further to your response, may I ask, if my Father has decided he does not wish to work and has retirement annuities arranged, would a monthly payment to him, for a undetermined period, be fair? I agree that we should have the company valued and will certainly put that into action. Regards Stuart
Marketing and Sales Expert and Author
I have been in business with my Father for the last 10 years. He established the business 35 years ago. He would like to retire however we are in a delicate situation regarding his "retirement payout". Does anyone have any advise on how we should go about this and what a respectable payment amount (%) and structure would be?
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Ed Hatton |
Best Answer
Posted 1 month ago
Assuming your father wants to leave the company, the legal and financial aspect will depend what shares he owns and who the other shareholders are – in effect you and any other shareholders, or a third party (not the company) would buy his shares. To establish the amount of payment you would need a valuation of the company from an accountant or broker, and then pay him in proportion to his shareholding. But from the way you phrase the question this is more of a social issue than a legal one, and if this is so you really need to establish what he wants or is expecting.
I assume the company does not have a pension fund which would pay him on retirement, so he may be looking for a bonus for his years of work and responsibility, which would be very reasonable. However if he is thinking that the company should now pay a lump sum to support him through retirement, this may not be practical. Ongoing income for him will be dependent on whether he wants to retire completely or just scale down activities. For instance if he still wants to be involved he could be paid a consulting fee, and he could keep his shares and benefit from the profits.