Importance of a business continuation plan
If you're a small business owner, find out why it's important to have a business continuation plan in place.
Competing interests of heirs and surviving owners
These interests are many and may include the following:
|What Heirs of Deceased Owner Want
|What Surviving Owners Want
|Top dollar for their interests
|Minimum cost for the interest
|Prompt settlement of the estate
|Prompt transfer of the business interest
|Set value of business for estate tax purposes
|Full control of the business - no interference from decedent's family
|Relief for family from worries regarding the business and its creditors
|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 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.