Succession Planning Small Business

Succession Planning Small Business-13
A buy-sell agreement ensures they’re given fair compensation, and allows the remaining co-owner(s) to maintain control of the business.

A buy-sell agreement ensures they’re given fair compensation, and allows the remaining co-owner(s) to maintain control of the business.

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What better way to look out for your family than providing them a full-running enterprise, and who better to uphold the mission of your business than your own family?

Of course, like any major family decision, it can stir a lot of conflict if not planned properly.

Your co-owner needs to be prepared to buy-out your shares, theoretically, at any moment.

Since not everyone keeps liquid cash around in this magnitude, many businesses will fund their plan with life insurance.

This type of agreement can help ease the burden of an unexpected transition— for the business and family members alike.

A spouse might be interested in keeping their shares, but may not have the time investment or experience to help it blossom.Making business decisions within a family can get messy.Emotions can get unhinged, especially after an untimely death or disability.Business succession planning is a series of logistical and financial decisions about who will take over your business upon retirement, death or disability.To write a succession plan, the first step is to identify the ideal successor to take over the business, then determine the best selling arrangement.Generally speaking, you don’t want to grant ownership to family members who aren’t involved in the business.Instead, many succession plans will include a buy-sell agreement work in the business, you typically still want to pick a single successor, as opposed to splitting ownership evenly between your heirs.This is compounded by the fact that 2nd generation businesses are risky; only 30% stay afloat after an inheritance.Altogether, this should beg the question; If your successor is skilled and business savvy, then perhaps the answer is ‘yes.’ If not, you may consider selling your business to a co-owner, key employee, or outside buyer instead.Succession planning or business continuation funded with life insurance provides flexibility for business owners.Although term insurance can be used to meet the needed funds at death, it’s the versatility of permanent life insurance that makes it the funding vehicle of choice to meet multiple goals.

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