You've probably worked hard as a family business owner to grow and manage an operation that provides income and wealth. As a matter of fact, it is probable that most of your energy, time, and finances have been invested in your business. As a consequence of this, it likely that it has become a substantial part of your assets. It can be unfortunate that the business that has provided for your family through your lifetime may no longer to do so after you die. Statistically, only a small percentage of family operations survive after the death of the owner.
Did you ever wonder what the legacy of your business would be when you pass on? If your establishment is completely reliant on your impact as an owner, it may retain little redeeming value after you die. Furthermore, your efforts at family continuation could be hindered by estate taxes, which may force your family to sell the business. Even if your company continues after your death, it could still be difficult to find a buyer. A small business is not like a publicly-traded establishment, in that it rarely realizes its full market value. As such, the profits from the sale may not be sufficient to meet your family's needs.
Typically, entrepreneurs begin the succession process by deciding who will be most likely to take over the business: an associate, 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.
A buy/sell contract is a key element of an effective business succession plan. It is a legal document that requires the estate of the late owner to offer ownership of the business at a set price, to: either the business itself (in a redemption agreement); to shareholders or co-owners (in a cross-purchase agreement); or to both (a hybrid agreement, or "wait and see"). A buy/sell agreement creates a market for the business interests of the deceased, determines a value, and ensures a successful changeover of the operation.
A buy/sell agreement can only be successful if there is sufficient access to funding. Due to this fact, most buy/sells state the method of financing as related to the sale. Since the contract is not effective until death, a life insurance policy may be the most sensible and inexpensive option.
Choosing the most suitable method of a buy/sell can be an involved process. Certain tax, estate planning, and control advantages exist with each method. The decision is almost always case-specific and should be discussed with skilled professionals. In conjunction with your attorney and accountant, your insurance professional will play a critical role in developing and executing your business exit plans.
Because 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 developing a buy/sell agreement ahead of time, you will help assure that your business and wealth are protected. In addition, it will increase the chance that your business will continue to provide for clients, associates, workers, and most importantly, your family.
Did you ever wonder what the legacy of your business would be when you pass on? If your establishment is completely reliant on your impact as an owner, it may retain little redeeming value after you die. Furthermore, your efforts at family continuation could be hindered by estate taxes, which may force your family to sell the business. Even if your company continues after your death, it could still be difficult to find a buyer. A small business is not like a publicly-traded establishment, in that it rarely realizes its full market value. As such, the profits from the sale may not be sufficient to meet your family's needs.
Typically, entrepreneurs begin the succession process by deciding who will be most likely to take over the business: an associate, 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.
A buy/sell contract is a key element of an effective business succession plan. It is a legal document that requires the estate of the late owner to offer ownership of the business at a set price, to: either the business itself (in a redemption agreement); to shareholders or co-owners (in a cross-purchase agreement); or to both (a hybrid agreement, or "wait and see"). A buy/sell agreement creates a market for the business interests of the deceased, determines a value, and ensures a successful changeover of the operation.
A buy/sell agreement can only be successful if there is sufficient access to funding. Due to this fact, most buy/sells state the method of financing as related to the sale. Since the contract is not effective until death, a life insurance policy may be the most sensible and inexpensive option.
Choosing the most suitable method of a buy/sell can be an involved process. Certain tax, estate planning, and control advantages exist with each method. The decision is almost always case-specific and should be discussed with skilled professionals. In conjunction with your attorney and accountant, your insurance professional will play a critical role in developing and executing your business exit plans.
Because 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 developing a buy/sell agreement ahead of time, you will help assure that your business and wealth are protected. In addition, it will increase the chance that your business will continue to provide for clients, associates, workers, and most importantly, your family.
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