What is Business Succession/Continuation Planning?
Its the smooth, effective and efficient way to transfer ownership of a business to the surviving shareholder/s, family member/s, key personnel or outside interested parties.
When discussing business succession planning we tend to assume that there are multiple shareholders/owners, however the majority of business's today have sole owners who are just as if not MORE vulnerable to the financial disasters by not having a formal plan of succession/continuation in place.
The sole owner IS THE BUSINESS, and the value of any business can depreciate by up to 70% the day after the death or illness of the owner, resulting in tremendous financial hardship for the surviving family, employees and investors.
It is essential to have a formal buy/sell agreement drafted by a competent attorney in order to protect the business owner and all other shareholders involved. The three main components of a buy/sell agreement are 1) Dictate the flow of the shares, 2) Provides for a formula and/or methodology for valuing the business, 3) Stipulates that shareholders purchase life and disability insurance in order to pay for their shares.
What Strategies Are Available?
Enter into a formal one sided buy/sell agreement with interested executives and/or key personnel if they have an interest in taking over the business.
Prepare business for a sale at some fixed time in the future for either 1) Management buyout, 2) Strategic sale or 3) Sale to outsider to mention a few.
Groom a family member who may currently be in the business to take over the business if they are competent enough and have the desire to do so.
Establish as ESOP (Employee Stock Ownership Plan)
Ensure that business owner has sufficient personal life, disability and long term care insurance protection to cover any potential future loss of income and to avoid having to be forced to liquidate valuable assets accumulated.
For more information on this topic please call us at (888)234-0532 or visit our website at www.levineadvisors.com
