Business Succession Plan

November 15, 2018

Your business is booming! I would hate to reality check you, but what plan do you have in place in the event something unexpected occurred? Its more than just passing away unexpectedly, if thats what you were expecting the Estate Planning Attorney to say. What if you needed to sell to your business partner or a third party? What about an injury leaving you partially disabled? 

Business succession planning is truly setting you up for success on many fronts. A buy-sell agreement is a tool utilized by business owners or partners of a business that can be funded by life and disability insurance policies. The agreement sets a valuation or at the very least, sets a calculation for valuing the business. The agreement stipulates that the parties agree to buy/sell the business if certain conditions arise. The insurance policy provides a means of paying the usually large sum for the purchase allowing the spouse of the business owner of the business owner themselves the full amount of their financial interest in the business. 

 

But what about a more pleasant succession plan, one that doesn't include contemplating serious injury or death. This is where advanced trust planning can come in and seriously benefit the business owner. With a DST, aka deferred sales trust, Deleware trust or installment sale trust, come in to save huge on taxes and provide extra protection of your now liquid assets. They function as a means to stretch out the capital gains of your sale in order to invest the pre-tax dollars in a meaningful way. 

 

Additionally, putting into place a coordinated handbook for your children or key employees to take over day to day management in any of the above mentioned scenarios is key to a smooth transition. 

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