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Importance of a business continuation plan

Provided by Advisys, Inc.

If you’re a small business owner, find out why it’s important to have a business continuation plan in place.

A woman small business owner stands behind the counter in her bakery.

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.

These materials were reproduced with the permission of Advisys, Inc. No State Farm® entity prepared these materials nor does State Farm represent or warranty the opinions or statements expressed therein. These materials are being provided for information purposes only.

The information in this article was obtained from various sources not associated with State Farm® (including State Farm Mutual Automobile Insurance Company and its subsidiaries and affiliates). While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. State Farm is not responsible for, and does not endorse or approve, either implicitly or explicitly, the content of any third party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. State Farm makes no guarantees of results from use of this information.


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