Thursday, January 18, 2007

Do You Plan To Work Forever?

Nobody lives and works forever so succession is inevitable for every business. But owners can get so busy in the day-to-day workings of the business that they never set aside the time to plan for the future.

If you’ve worked hard to build a business, make sure you have also put together a plan for an orderly transfer of ownership. Poor or non-existent planning has resulted in the end of many businesses and, particularly in the case of family owned businesses, can lead to financial problems and even breaking families apart. Failing to plan can also result in excessive estate taxes and in some cases the need to sell the company or valuable assets in order to pay taxes, administration expenses and debts.

A key part of a succession plan is often a buy-sell agreement, sometimes referred to as a shareholders agreement. This agreement can be used to provide a market for each owner’s interest in the event of certain triggering events (such as death or disability), promote continuity and stability, potentially freeze the value of an owner’s interest for business or estate tax purposes, help to retain S-corporation status and serve as a way to resolve a dispute or deadlock among owners. If nothing else, the agreement can be used to lay the groundwork for long-term planning.

Planning is a process, and it’s never too early to start. To preserve your business for the future, do the practical thing and start working on you succession plan today. To further address this topic or to talk about the options that are available, please contact me to continue the discussion.

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