You've probably worked hard as a family business owner to manage and build an operation that produces income and prosperity. As a matter of fact, it is probable that most of your energy, time, and finances have been invested in your business. As a result, it can be safe to assume that it has become a major part of your assets. It can be unfortunate that the business that has provided for your family through your lifetime may not continue to do so after you die. Typically, only a small portion of family operations continue after the death of the owner.
Your business may be so reliant on your contribution as an owner, that it could have little ongoing worth after you die. Also, any attempts to pass the business on to family members may be hindered by estate taxes (up to 49%), which could leave no option for your successors but to liquidate. Although the business may still continue after your passing, finding a buyer maynot be easy. In contrast to a publicly-traded business, a closely-held small company may not realize its full worth on the market. If your family does not have direct involvement in the business upon your death, the proceeds from the sale may not be sufficient to financially support them.
Most times, entrepreneurs begin the continuation process by choosing who will be most likely to take over the business: a partner, a family member, an employee, or perhaps an outside buyer. Having a an exit plan in place, will ensure the highest valuation for your business. So it is important that you find a potential buyer as soon as possible.
The cornerstone of a good business succession plan is the buy/sell agreement-a contract between owners, or the business itself and owners. Such an agreement is legally binding and commands the estate of the deceased owner to sell the interest of the business defined, at a preset price, to: either the business itself (in a redemption agreement); to co-partners or shareholders (in a cross-purchase agreement); or to both (a hybrid agreement, or "wait and see"). It establishes a market for the business interest of the deceased, sets the price, and ensures smooth transition of the business.
A buy/sell agreement can only be successful if there is sufficient access to funding. Due to this fact, most buy/sells indicate the method of payment as related to the sale. Since the contract is not triggered until death, a life insurance policy may be the most sensible and cost-efficient option.
Finding the most suitable method for a buy/sell is often a complex matter. There are certain advantages related to your estate planning, operating control, and taxes that exist with each method. The option you choose will mostly rely on the particular case, and it should always be discussed with qualified professionals. In addition to your attorney and CPA, your insurance professional will also have a major role in developing and implementing your succession plan.
Since your succession plan is subject to change, your buy/sell agreement should be periodically reviewed to ensure that it it is still relevant to your needs. By establishing a buyout contract in advance, you will help assure that your business and wealth are preserved. Furthermore, it will increase the chance that your business will continue to produce good results for customers, associates, workers, and most notably, your family.
Your business may be so reliant on your contribution as an owner, that it could have little ongoing worth after you die. Also, any attempts to pass the business on to family members may be hindered by estate taxes (up to 49%), which could leave no option for your successors but to liquidate. Although the business may still continue after your passing, finding a buyer maynot be easy. In contrast to a publicly-traded business, a closely-held small company may not realize its full worth on the market. If your family does not have direct involvement in the business upon your death, the proceeds from the sale may not be sufficient to financially support them.
Most times, entrepreneurs begin the continuation process by choosing who will be most likely to take over the business: a partner, a family member, an employee, or perhaps an outside buyer. Having a an exit plan in place, will ensure the highest valuation for your business. So it is important that you find a potential buyer as soon as possible.
The cornerstone of a good business succession plan is the buy/sell agreement-a contract between owners, or the business itself and owners. Such an agreement is legally binding and commands the estate of the deceased owner to sell the interest of the business defined, at a preset price, to: either the business itself (in a redemption agreement); to co-partners or shareholders (in a cross-purchase agreement); or to both (a hybrid agreement, or "wait and see"). It establishes a market for the business interest of the deceased, sets the price, and ensures smooth transition of the business.
A buy/sell agreement can only be successful if there is sufficient access to funding. Due to this fact, most buy/sells indicate the method of payment as related to the sale. Since the contract is not triggered until death, a life insurance policy may be the most sensible and cost-efficient option.
Finding the most suitable method for a buy/sell is often a complex matter. There are certain advantages related to your estate planning, operating control, and taxes that exist with each method. The option you choose will mostly rely on the particular case, and it should always be discussed with qualified professionals. In addition to your attorney and CPA, your insurance professional will also have a major role in developing and implementing your succession plan.
Since your succession plan is subject to change, your buy/sell agreement should be periodically reviewed to ensure that it it is still relevant to your needs. By establishing a buyout contract in advance, you will help assure that your business and wealth are preserved. Furthermore, it will increase the chance that your business will continue to produce good results for customers, associates, workers, and most notably, your family.
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