Succession Planning: How to Ensure Your
Business Won’t Die With You
Succession planning is essentially estate planning for businesses and an
essential tool to use in protecting your business interest as well as
passing it to family members or business partners
upon your death. A succession plan dictates what happens when principle
owners pass away. Succession planning is also very important in family
businesses for passing business interests down to family members. If there
is no Succession Plan, the business and all the time and effort put into
it may be lost.
The three major benefits to succession planning for businesses are:
- Succession planning allows for assurance of an agreeable price for a deceased
- Succession planning allows for the ability to buy the deceased member’s
share quickly and with no liquidity with policy benefits.
- Succession planning allows for a timely settlement of a deceased partner’s
share of the business with minimal effect on a business’s operation.
One common strategy for succession planning is purchasing life insurance
for each of the business owners (whether through the business or personally)
and naming the business or another owner as a beneficiary.
In that case, the proceeds of the insurance, in the event of a death,
go to purchasing of the deceased owner’s interest. This avoids messy
probate claims and auction – allowing the business to function uninterrupted.
Another great strategy is to make sure your operating agreements are bullet
proof and dictate exactly what happens when an owner or member of the
business passes away. This way, there is no room for interpretation as
to what happens to the business. Also, make sure your operating agreements
state that the business will not dissolve upon a member dying and expressly
state an alternative result.
Finally, make sure your personal estate plan refers back to and is consistent
with the provisions of these agreements. That way, there will be no contradictions
as between your personal estate plan and your business’ estate plan.
Please visit my website or contact me directly if you would like any more
information regarding Business Succession Planning, Asset Protection or
www.AssetProtectionAttorneys.com | The Presser Law Firm, P.A.
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