Doctors, dentists, lawyers, architects and accountants often open their own small professional firms. But often, they don’t begin retirement planning and succession planning soon enough. As professionals become established in their practices, they need to ask themselves the following questions well before they intend to retire:
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1. Will I be able to afford to retire? Large companies and corporate practices often have retirement savings plans. Solo and small practitioners often do not start saving for retirement early enough because we don’t have access to plans like others in corporate America. The best practice is to start retirement savings by age 30. Many professional associations have financial planners and plans, or you should sit down with an indpendent financial planner.
2. What are your professional obligations to your firm and vice-versa? As a partner in your practice, you may have made significant capital contributions, are entitled to profits, and have hired junior colleagues who expect mentoring or who may not be able to practice independently. You should review your partnership or shareholder agreement, and make sure your understanding is accurate. It may need to be revised if it is several years old, or instituted if there isn’t one. What are the tax consequences of your partnership/shareholder agreement?
3. Finally, what have you done on an organizational level to prepare for your exit? Are you going to sell your practice? Your client list? Some assets? Or just shutter it? Have you brought in associates to take over when you leave? How will you fund the buy-out? Have you properly trained them in running the practice and managing the employees? Under what circumstances will you continue to work in the transition?
