A proper business succession plan will address all potential risks that could impact you and your business, even the ones you don’t anticipate.

While no one likes to think about the possibility of disability or premature death, planning for the unexpected is the only way to protect the long term financial health of both you and your business. As a business owner, protection in the event of an unforeseen event goes beyond the personal protection offered by life and disability insurance. While these products play a key role in any protection plan, let the experts at Barrons explain all the many other issues to consider:

• Do you have a buy-sell agreement with other shareholders or partners to ensure the smooth transfer of ownership interest?
• Your will, living will, and powers of attorney are well coordinated with the buy-sell agreement and provisions are made for any trusts to complete the succession?
• Your successor has the financial means to buy the business from you or your estate.

A buy-sell agreement provides certainty of ownership in difficult situations that include:

• The retirement, death or disability of an owner.
• A non-resolvable dispute between owners.
• Personal insolvency of an owner.

Questions:

• In the event of your disability or death, will ownership of the business be liquidated, sold, or given to family members, sold to third parties, or – in the case of death – retained by your estate?
• Do you have a properly structured buy-sell provision in your shareholder’s agreement dealing with the timing, amount and financing of the purchase of your business interest in the event of death or disability?
• Do you have insurance or another source of financing in place to provide for the capital for the purchase of your business interest?
• Have you determined the tax cost that will arise in the event of your death? (e.g. capital gains tax)