How Does A Sole Proprietor Retire? 
A business owner uses a business to convert their human capital -LRB- skills , energy and time -RRB- into a stream of income . However converting that business into a stream of retirement income is a different issue . When a business owner wishes to retire they remove from the business one of its greatest assetsthemselves ! There are a couple of options facing the business owner to use a business to generate retirement income . The first option is to sell the physical assets of the business for the best price possible and close the business . Under the best circumstances this approach will yield a percentage of the value of the assets and generates nothing from the good will of the business . However , this approach will free the business owner from all responsibility for the business and they can invest their time as they wish , free from the concerns of the business . A second option is to sell the business as a going concern . Selling a business is complicated . Whoever buys the business expects that the business will pay for itself . People dont buy a business on a whim . Unless the potential buyer of the business can secure outside financing -LRB- which is quite unusual -RRB- the business owner is actually going to become the banker for the people buying the business . The result is that a business owner will likely fail to realize the full value of the business . In most small businesses it is the personality of the owner that makes the business successful . When that owner retires the greatest asset of the firm has left as well . Even your best employee can not replace you . So now the business owner is the banker for a company that is probably going to be less successful and that will not generate much retirement income . Many sole-proprietors have poured all their profits into the company . When they want to retire they find that they have invested in little else . Since it is expensive and complicated to establish a retirement plan for the employees the entrepreneur forgets to set aside money for his own retirement . If the business owner establishes a retirement plan , that plan might reduce the value of the business because of its long term obligations . Often successor management fails . Making a success of a small business isnt easy . If successor management fails owing the original business owner money , that business owners retirement income is jeopardized or worse yet , the former owner might have to come back into the business at a time when it is inconvenient and perhaps damaging to their health . An entrepreneur can accumulate money for his own retirement by setting aside funds early in the business development . This is really difficult when the business is screaming for more cash . However , setting up a pension plan or other savings plan is crucial in order to have money on which to retire . Grooming successor management can be expensive and difficult but it is the only way to prepare a stable person with the capacity to purchase the firm . There needs to be a direct transfer of the face of the company from the original owner to the successor . The bookkeeper may be great but he is unlikely to lead a company into success when high personal contact is required . A business owner might consider selling the physical assets of the business , and also negotiate a contract that in exchange for a fee for a period of time at a stipulated rate the original owner will provide consulting for the successor . Then rather than paying a debt which is not deductible the successor is paying wages or a fee and that is deductible . The original business owner is receiving income rather than interest and payment of a debt . A business may have limited value when it comes time to retire . Plan for your retirement now , while you can . 