For small business owners that do not plan to pass the business down to the next generation, it is a good idea to plan ahead for the sale of the business in the event of your death or capacity. One option is to enter into a Buy-Sell agreement. A Buy-Sell agreement guarantees that you (or your loved ones) will receive the fair market value of your interest in the business in the event you, or your surviving loved ones, must sell it later. In essence, a Buy-Sell agreement is a binding agreement … [Read more...] about What is a Buy-Sell Agreement?
Business Succession Planning
One popular method used to transfer ownership of your business from one generation to the next is to create a Family Limited Partnership (FLP). An FLP allows you to transfer your legal interest in the business to the next generation slowly, over time, while maintaining control over the day-to-day management of the operation until such time as you are ready to retire. In addition, you may be able to gain tax advantages by using an FLP to transfer interest in your business to future generations. … [Read more...] about What is a Family Limited Partnership?
At some point, you will no longer be at the helm of your business, either because you retire, sell your interest, or because of your death. Planning for that eventuality is imperative to ensure that you, or your loved ones, do not lose the value of all your hard work up to that point. Precisely when you should start thinking about transitioning ownership of the business depends, to a great extent, on whether you plan to pass it down to the next generation, sell your interest to a partner, or … [Read more...] about When should I begin transitioning ownership of my business?
Liquidity refers to cash assets or assets that can be readily converted to cash. A small business often lacks sufficient liquidity, particularly when they are relatively young businesses or when they are farm/ranch operations. All too often, the business’s assets are tied up in things such as equipment, supplies, merchandise, or livestock that cannot easily be converted to cash. In the event of your death, however, your entire estate could be subject to federal gift and estate taxes which are … [Read more...] about Why is liquidity important?
Management continuity focuses on what happens in your absence. Who will take over the day-to-day management of your business? Never assume that someone is willing and able to do so, even if that person is an adult child or even a trusted senior employee. Even if they are, does he/she have the legal authority and practical capacity to step into your shoes? If not, the business could falter rapidly. Both customers and suppliers can become reluctant to do business with an operation when they are … [Read more...] about Why is management continuity important?
Because every business is unique, no two business succession plans are the same. Nevertheless, there are some common goals and objectives that most business owners try to achieve with their plan, including: Designating someone to take over the immediate day to day control of your business if you are incapacitated tomorrow because of a catastrophic accident or debilitating illness. Ensuring that everyone impacted, including employees, business associates, and family, is prepared to accept … [Read more...] about What can a business succession plan accomplish?
You understand the importance of protecting your business from common threats such as natural disasters, theft, and fire. In fact, you likely purchased insurance to compensate you in the event of a loss caused by a covered event. Have you considered though what would happen to the business if something happened to you? Not only could your business suffer considerable economic losses in your absence, but the entire business could go under without you at the helm. Incorporating business succession … [Read more...] about Why do I need a business succession plan?