BUSINESS PERPETUATION PLANS In our work with business clients across the country, one consistent theme emerges in conversations with owners and leaders: “How do we transition our business to the next generation or plan an exit strategy that maximizes our return for the time, blood, sweat and tears we’ve poured into it?” As we navigate through that conversation with our clients, several key themes drive the discussion: • What would happen to your business if you were no longer in the picture? • How will your business operate when you retire? • What will happen to the ownership of the business and personal assets? • Would ownership be transferred? How and to whom? • What would your business do in the event of a sudden death? • Where would the money come from to pay business loans and cover ongoing expenses? • Most importantly, which legal and financial arrangements do you have in place to manage this? But, just as it is important to cover your buildings, equipment and vehicles, it is crucial to protect the assets you have worked so hard to build. PLANNING FOR BUSINESS CONTINUATION What the Heirs Want • Ongoing financial security after the loss or sale of the business. • Prompt settlement of the owner’s business and/or estate, which includes proper tax valuation of the business and/or estate. • Retention of the business interest by other current shareholders, which may be family members or a prompt sale of the business to “outsiders” at an attractive price. In the Absence of Planning, Unhappy Consequences Can Result • Conflicts and possibly even litigation between the remaining shareholders and the former owner’s heirs. • Delays in the transition to successor ownership. • Potential loss of customers, employees and creditor confidence can damage the business and possibly force its liquidation. Advantages of a Buy-Sell Agreement A formal, written buy-sell agreement among the owners/heirs is the first step in assuring: • An orderly and successful transition in business ownership. • A fair price and terms reasonable to all parties. BY SHAUN McCHESNEY, MARSH McLENNAN 22 Community Banker
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