Monetizing your business equity

As a business owner, you eventually will face the task of monetizing the equity trapped in your privately held business, which likely is your largest asset. This is made more complicated by current economic conditions, which are causing individual retirement accounts to decrease dramatically and home values to depreciate.

Examining how your company's value can be extracted is an integral part of the exit planning process and something to consider as you move toward retirement.

Extracting value

There are two ways to extract value from your business. First, you draw income directly from the business in terms of salary, personal and business expenses, bonuses you pay yourself and retirement plan savings. A second and much more important income route—particularly in light of current economic conditions—is retaining the equity, or nonliquid part, of your business (in other words, monetizing the wealth trapped in your business).