Three Tips for Baby Boomer Startups

Last Updated Aug 4, 2010 4:29 PM EDT

A recent report by the Ewing Marion Kauffman Foundation revealed that people 55-64 years old had one of the highest rates of business creation from 2008 to 2009. It makes good sense. The mortgage may be paid off, the kids have probably graduated from college, and the corporate world may have lost its allure (or lost its need to employ you). But while starting a business as you inch toward retirement age may be more common these days, it can also be a lot more complicated than starting a company in your 20s or 30s.
Older first-time entrepreneurs may have property, retirement savings, college funds, and other assets that could be put in danger if the business goes south. I recently asked John Gerber, founder of, which provides entrepreneurs with early-stage legal resources, to offer some tips for baby boomers who are starting businesses. Here they are:
Protect Your Retirement. "One advantage of starting a business later in life is that the entrepreneur may be in a position to finance the business through funds accumulated over the years, such as a retirement plan. Sometimes, funds in a 401K , for example, can be used to finance the startup of a business without incurring withdrawal penalties. Additionally, the entrepreneur may have personal assets, such as home equity, that can be tapped as collateral for a loan. This can be a two-sided sword. Both options put the entrepreneur's "nest egg" at risk if the business is not successful. So while these financing options offer an opportunity that may not be available to younger entrepreneurs, they need to be balanced against the risk of losing assets that may be difficult to replace."

Be Careful with Family. "Many new business owners over 55 go into business with family. This could include a spouse, sibling, or child. While this may be very rewarding personally and professionally, there are also some potential legal pitfalls. Make sure to have a partnership agreement at the outset. It should outline ownership, responsibilities, and what happens if one partner is no longer involved (voluntarily or otherwise) or the partners have an unresolvable dispute about the business. If family is not involved in the partnership, they may still do work for the business. Make sure to have clear employee or subcontractor agreements in place to avoid conflicting expectations and future problems. "

Start With the End in Mind. A new business owner over 55 needs to establish an exit strategy - basically a business will. There are 2 key parts to this. First, how will s/he derive value from the business after s/he is no longer active in it? Can the business be sold? Is there a family member who should take it over? Or employees? Second, what will happen to the business if the owner is no longer living? Who makes decisions about its operations and/or disposition? The business owner needs to plan for the transition on retirement or death and to put legal succession and estate plans in place for these possible situations.

Did you start a business after the age of 55? What were the advantages and disadvantages? Tell us about it.
Image from Flickr user h.koppdelaney, CC 2.0