There are many reasons to create a business continuation plan. It can help ensure that your family receives fair value for your interest in the business. It can also allow the surviving owners of the business to keep operating after the loss of one of the owners, with minimal inconvenience.
The prime reasons a continuation plan for your business is vital include:
- The competing interests of heirs and surviving owners: While the heirs of the deceased owner are likely to want top dollar for their interests; a prompt estate settlement; a set business value for estate tax purposes; and relief of family worries about the business and its creditors, surviving owners are likely to want very different things. Surviving owners want to pay the minimum for the deceased's interests; they'll want prompt transfer of the business interest to them; they'll want full control of the business with no interference from the decedent's family; a continuing line of credit; and to retain customers and employees.
- The potential for problems without a written agreement: Among the many possible problems are heated conflict among surviving owners and the decedent's family; unhappiness on all sides and possible litigation; delays in settling the estate and continuing business growth; loss of customers; and possible liquidation of the business, which may bring less than full value.
What's the solution? A written agreement, and cash.
Take time now to make sure that the business will be passed in an orderly manner following a death. This benefits all parties and their heirs. A written agreement can provide:
- An orderly transfer of the business;
- A mutually agreeable sales price;
- Mutually agreeable terms of sale;
- A value that is binding on the IRS for federal tax purposes*; and
- Stability for customers, staff, creditors and investors.
An agreement which is favorable to all parties can be more easily developed prior to a crisis.
To get help from a financial adviser, please fill out