Importance of a Business Continuation Plan

Competing Interests of Heirs and Surviving Owners

These interests are many and may include the following:

What Heirs of Deceased Owner Want
  • Top dollar for their interests
  • Prompt settlement of the estate
  • Set value of the business for estate tax purposes
  • Relief for the family from worries regarding the business and its creditors
What Surviving Owners Want
  • Minimum cost for the interest
  • Prompt transfer of the business interest
  • Full control of the business – no interference from decedent’s family
  • Continuing relationship with creditors
  • Retention of customers and employees

Potential Problems Without a Written Agreement

Frequent results include:

  • Heated conflicts among the remaining owners and the decedent’s family.
  • Unhappiness on all sides, and sometimes litigation.
  • Delays in settling the estate and continuing business growth.
  • Loss of customers and loss of business value.
  • Possible liquidation of the business which may bring less than full value.

The Solution: A Written Agreement (and cash)

Taking the time now to see that the business will pass in an orderly manner at the time of death will benefit all parties and their heirs. A written agreement can provide:

  • An orderly transfer of the operation, management, and ownership of the business.
  • A mutually agreeable sales price and preservation of business value.
  • Mutually agreeable terms of sale.
  • A value that is binding on the IRS for federal estate tax purposes.
  • Stability for customers, employees, creditors, and investors.

An agreement which is favorable to all parties can be more easily drafted prior to a crisis. Insurance can help fund the agreement.

 

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