Business Succession Planning
No man is immortal; business owners will inevitably pass away, leaving
their business shares up for grabs. That is why your business (just like
yourself) needs an estate plan that dictates what happens when principle
owners pass away. Rather than having your business shares go into valuation
and auction – which can have a detrimental effect on your business
structure as a whole, you can prepare and execute certain agreements that
allow your partners to less complicatedly buy out your business interest.
One common strategy is purchasing life insurance for each of the partnership's
owners (whether through the business or personally) and naming your business
or yourself as a beneficiary. In that case, the proceeds of the insurance,
in the event of a death, can go to purchasing their partnership interest.
This avoids any messy probate claims and auction – allowing the
business to function uninterrupted.
Next – make sure your operating agreements are bulletproof and dictate
exactly what happens when an owner or member of the business dies. This
way, there is no room for interpretation.
Finally, make sure you have a personal estate plan that refers to consistent
provisions of these agreements.
The more layers of protection your business has, the better protected it will be.
The three major benefits to succession planning for businesses are:
- Assurance of an agreeable price for a deceased partner's share.
- The policy benefits will be quickly available to buy the deceased's
share of the business, with no liquidity.
- Succession planning allows for a timely settlement of a deceased partner's
share of the business with minimal effect on a business's operation.
Every business should have an estate plan to ensure that matters, in the
event of a partner's or business owner's death, go as smoothly
Contact us today to talk about your business (and personal) succession
planning concerns and objectives.
YES, YOU CAN LOSE EVERYTHING!
You may think that your wealth is safe and that you don't need protection.
But don't delude yourself and accept reality — for every 60
minutes you spend making money, spend 60 seconds thinking about how to