Success in succession planning

Planning is the key

 

There is no Superman.

If you’re in business, you need to plan for the worst. What would you do if your partner in business died or became disabled? Your business would feel it. A key player is gone or unable to contribute to the business. How might this affect your business, income, retirement?

Worth thinking about, isn’t it?

A thoughtful business

First of all, a well-crafted buy-sell agreement is crucial. You need a set of ground rules in case of conflict. You need a buy-sell agreement so that you can engage in a mutually beneficial relationship with your partner. You and your co-owner need to set down the rules of your business. That way there will be little to surprise you. Protected by identical rules in case of the unforeseen, you’ll both be secure in that eventualities will have been thought of, and a system will be in place to deal with them.

An accord

Within a buy-sell agreement, there are clear rules for succession whether due to death or other events. The agreement will benefit the interests of all shareholders. Without a buy-sell, your business, your income and your family could face difficult circumstances. A buy-sell establishes secure commitments and responsibilities for buyers, sellers and heirs. With a proper agreement, you can feel secure that provisions have been made for triggering events.

Death, disability, divorce, retirement, bankruptcy or discord between co-owners are all critical life events affecting a business. Plan and you will grow.

Insure there are no “what ifs”

Your partner dies. Now where do you get the funds to acquire his part of the business? What if there are many partners? You may have enough money to buy the outstanding shares, but is your money liquid? What if you had to sell assets at a bad time?

As you can see, it’s important to have options. Borrowing money is a possibility, but you’ve got to pay the loan back with interest. After tax dollars that can’t be deducted are rarely the best way to go.

Insurance policies provide many empowering options. They are a fairly inexpensive way to have the funds on hand. The policy will guarantee that there is cash available in a lump sum when the triggering event occurs.

Assuring continuity

If your buy-sell agreement is funded by insurance, you will be liquid at the exact time you need to be. Your business survives the loss that can occur due to forced liquidation, death or disability.

The buy-sell provides direction to remove the risk of friction from surviving owner(s) or heirs, and provides for continuity in the operation of the business. Furnishing life insurance to diminish business debt or offsetting a shortage in sales because of the death of a co-owner or other key person in the business can be structured into the agreement.

Planning is fundamental. Why wait for a catastrophe? Get effective insurance protection. Eliminate insecurity.

There is nothing to fear, but the lack of planning and preparation.