Your business didn’t just fall into your lap, so don’t expect passing it on to a new owner will be any easier. Whether you are looking to retire or want to have a plan in place in the event of your passing, you will need legally-binding documents in place if you wish to see your dream outlive you.
It won’t require quite the same time invest as did getting your business off the ground, but you must be sure to tailor your plan to the specifics of your business and your desires for it. Will it be left to your heirs? Will your business partners buy out your shares? Will you find an outside buyer? Whatever your goal, there are a variety of pitfalls in the road ahead:
- Looking to sell? If you haven’t set your business up with the right LIFT Foundation (legal, financial, insurance, and tax), your business may be sellable for only a fraction of what it would otherwise be worth.
- Partner buyout? You need to make sure they will have the cash flow required to purchase the share of ownership left to your heirs, or have another plan in place like having the transfer be funded by life insurance proceeds designated for that purpose.
- Passing it down to your children? This is one of the hallmarks of the American dream, but in reality, it’s important to consider whether they want to work the business, and even if they do, whether they are competent to take over.
Each of these issues can be overcome with some planning and actions taken in advance.
You will find the expert assistance of an experienced Creative Business Lawyer® as invaluable in planning for leaving your business behind as they were in its beginning–whether a buy-sell agreement, a business succession plan, a business transition plan or a business preservation plan.
Done right, a buy-sell agreement will create a number of triggering events. Any circumstance in the lives of you or your business partners may be provided for–be it death, disability, divorce, or simply a desire to get out–and result in the actions you desire.
Whether part of a buy-sell agreement or a different type of plan, the specifics of the buyout can also be nailed down. Your plan can run the gamut from an aggressive payment plan that will be completed over two years or less, or a more conservative plan of five or more years. Obviously, it will be important that your company is not so tied down by payments that it can’t survive and thrive. One course of action is designating your business as a beneficiary in your life insurance policy, providing it the liquidity necessary to put your business protection plan into action. Turn to a Creative Business Lawyer® if you wish to see both your family and your business thrive for years after you’re gone.
If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit. Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that fee. Call us today at 612-206-3700 or send us a message via our contact page.
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