Business Planning & Continuation

Business Planning & Continuation

If you own a small business, your attention is understandably focused on developing your business plan, managing your operations, driving sales and making money.

There are a few things many business owners don’t consider that, if left unattended, could easily bring your business to its knees almost overnight. Proper planning can help preserve the value of the business by protecting it from the loss of a key employee and guide passing of ownership so it’s not left to chance.

Business succession

If you or one of your business partners dies without a business succession plan in place, the interest in the business passes to their heirs and you may suddenly find yourself in business with your partner’s wife or children. Business succession planning is a critical strategy to help ensure that your business continues on after the death, disability, or retirement of one of the partners in the business.

Here are some advantages to having a business succession plan in place:

• It will place a value on the business or a method to determine the value of the business at time of death. This lets all the partners agree in advance as to how the business will be valued so the remaining business partners can buy out the remaining share at a price that is fair to everyone. 
• By purchasing life insurance on the lives of the business partners for the value of their share, the heirs of the deceased owner can be assured of timely payment at a fair price for their share of the business. 
• Life insurance gives you the peace of mind to know that buying out the other share of the business won’t put a strain on your business’ cash flow or force you to sell off assets to pay the bill, protecting you from an outside takeover.

Key person coverage

Preserve the value of your business against the unexpected loss of a key employee.

Advantages of Key Person coverage:

• Income tax-free death benefits to help replace profits due to loss of employee
• Provides cash to keep lenders from foreclosing on business loans, reducing lines of credit or increasing interest costs
• Cash can be used to recruit, hire and train a replacement key employee