FOR MOST BUSINESS OWNERS, retirement is either a subject they welcome or the last thing they want to think about. If you're looking forward to that day, you've probably already started preparing to move on from your business. “For many business owners, their retirement plan is their business,” says Judith Anderson, senior vice president, Retirement Personal & Wealth Solutions, Bank of America.

Indeed, selling your business — or gifting it to the next generation — at retirement can supplement your income, as long as your company has the systems in place to operate without your direct participation. “If you conclude that the company is viable without you there to run it, your next step is to get an accurate valuation of its worth,” says Joe Astrachan, emeritus professor of management at Kennesaw State University in Georgia.

A professional valuation and tax expert can help you look past your emotional attachment to the company, gauge its true value and arrive at a realistic number. With that information in hand, consider these three options for transferring or selling the business to family members, friends, longtime employees or some other interested buyer. Each has its own advantages.

Say you want to pass the business down to a child or grandchild. The lifetime federal gift tax exemption gives business owners considerable latitude to transfer part or all of the company as a gift. The exemption can change annually; the latest information can be found in our Annual Limits Guide.

Your advantage: You may owe federal gift taxes on amounts exceeding the exemption, but once the business is out of your hands, it's no longer part of your estate, and future growth of the company won't subject your estate to additional transfer taxes. You may also be able to supplement your retirement income by continuing to work for the business and drawing an income from the new owners. 

What if you want to sell the business to a family member or a longtime trusted employee who doesn’t have enough assets to make the transaction? To get around that, you might choose to sell the business to heirs — or even an outside buyer — by lending them the money for the sale in exchange for a promissory note, which allows the buyer to pay you back directly.

Your advantage: You and the buyer determine what terms work for all parties involved. Not only does the buyer benefit from the opportunity to own a business, but you also receive a steady stream of income from the principal and interest that the buyer pays for an agreed-upon period.

Even after receiving a lump sum from a sale, many former business owners can stay involved and earn income by serving on the board of directors or consulting. You might even continue helping out in day-to-day operations in a reduced but vital role such as serving clients who’ve been with the company for years and are used to working with you.

You may decide that you don’t want to cut ties with your business entirely. Another option is to sell part of the company while retaining a portion of business assets and income.

Astrachan recommends that such arrangements be agreed upon beforehand and spelled out clearly in the formal transfer or sale agreement with the new majority owners. That also should be the case if you're turning the business over or selling it to other family members.

Your advantage: You may pay capital gains tax on any profit from the sale, but you may also get a steady income from rent or lease of office space or other assets.

Prior to making any move, consider your income needs in retirement. Could the business’s value be enough to fund your retirement, notwithstanding other savings and investments that you may have? Keep in mind, too, that merely matching your current salary in retirement may not be enough if the business has also been paying for things like health insurance, car leases, club memberships and tax preparation — expenses that you'll have to start covering yourself. “Having a comprehensive conversation with your financial advisor about your needs in retirement is key to making the right decision,” notes Anderson.

Whatever choice you make, a smooth transition can be the crowning legacy of the years of care and effort you've poured into your business. It also can leave you with income to support your life's next act or in some situations keep you involved in a business you love. And you can have the satisfaction of knowing that your vision has the potential to live on for generations to come.