It's always good to have an exit strategy from your fishing business, regardless of what stage your business is in. An exit strategy for a mature business is different from a new entrant or growing operation where an operator may need to think about worst case scenarios with lots of debt. Therefore retirement planning for self-employed, family-run businesses has unique challenges. We've gathered a few resources that fishermen (and farmers) have found useful when looking ahead.
Louisiana Sea Grant has produced excellent videos discussing self-employed retirement challenges, transitions and the basics of estate planning for commercial fishermen on their Louisiana Direct Seafood site.
When planning an exit strategy, there are several considerations. Think about your financial needs in retirement, the financial health of your fishing operation and your willingness to let go of a business you have likely built from the ground up. All business transfers require pre-planning and engaging any partners (i.e. family member, crew) in the process early.
You may want to pass your entire business on to a targeted buyer if you want to keep the business within your family or community. On the other hand, not everyone will sell or transfer their business as a whole, and will instead sell off parts of it. However you plan to divest, there will always be capital gains to consider. An understanding of corporation or partnership structures to ease the transfer process, gifting your fishing assets, and, of course, other tax implications of various transfer strategies is also critical to your planning. All these topics and more are covered in the Alaska Sea Grant publication "How to Make a Directed Transfer of Your Fishing Business."
|How to Make a Directed Transfer of Your Fishing Business|
Will your boat and permits remain in your family or community after you retire? The amount of capital required to enter the fishing business has increased, decreasing the likelihood that a new fishermen will be able to buy your business in one transaction. With forethought, however, you can still pass all or most of your business assets to a person or group in a "directed transfer."
There are several seller-financing options if you have a targeted buyer. Self-financing your intended buyer or family member over an extended period of time can help ease your tax burden. Another mechanism would be using a third-party to oversee long-term payments by using an escrow service or a participation loan such as outlined in the following PowerPoint presentation.
Participation loans are provided to borrowers by both the seller and a bank, with the seller acting as a kind of "guarantee" on loans that would otherwise be out of a buyer's reach financially. This presentation provides introductory information on these types of loans. Contact your lender for details.
To further explore ideas about transferring your business, click or download the mp3 below to hear a few experts give their perspectives on fishing business transfers, during an online class hosted by Alaska Sea Grant.