Do you have a Succession Plan in place?
December 17, 2014
Have you considered what needs to be done with your business when you are doing your estate planning? If you own a business, it is important to have a management succession plan and also have a buy/sell agreement for your business interests.
You worked years to build your business and sometimes are so busy working in the business that you may forget to work on the business. Having a succession plan in place will make sure your strategy for your business can remain intact if something were to happen to you. You want to protect your asset (your business) and have a plan in place if there is a divorce, change in partners, loss of a key employee, death, acquisition of a business or sale.
A buy/sell agreement is a legally binding agreement between co-owners of a business that governs the situation if a co-owner dies or is otherwise forced to leave the business, or chooses to leave the business.
A buy/sell agreement should generally be funded by life insurance. There are many different types of life insurance you could put in place. Term insurance generally is the least expensive and most widely used option. A Financial Advisor can help you manage your investments personally and your 401(k) for your business, but they should also help you with your succession planning. An independent Financial Advisor can help get you quotes from various insurance companies and retirement providers and can help you make the best decision possible. If you would like quotes from these various companies, you can call our office at 763-231-9510 and we can take care of it for you.
Another reason having a buy/sell agreement in place is important is in the case of divorce. I’ve helped a number of business owners through the divorce process and having a buy/sell agreement and succession plan in place was extremely helpful in facilitating a divorce settlement.
I know we get so busy running the business we forget to think about succession planning. But I believe we really forget about it because we think we will live forever and we also don’t want to think about dying. But, just like you set up a will, trust or healthcare directive for your family, you want to set up things correctly to protect your business now and in the future.
I encourage you to set a goal. Before you hop on a plane for you next trip, make sure you meet with your Financial Advisor or call our office. Also make sure to fund your trust and buy/sell agreement and have your succession plan in place.