As an entrepreneur, you've probably worked hard to grow and manage a business that produces income and prosperity for your family. In fact, most of your time, energy, and finances may have been invested in your business. As a result, it has more than likely become a major part of your estate. Unfortunately, the business that has provided for your family during your lifetime may not do so at your death. Typically, only a small number of family businesses are actually passed on to the next generation.
Your business may be so reliant on your contribution as an owner, that it could have little remaining value after you pass on. Also, any efforts to pass the operation on to family members may be thwarted by estate taxes (up to 49%), which could leave little choice for your successors but to liquidate. Although the business may still continue after your passing, finding a buyer may be difficult. In contrast to a publicly-traded company, a closely-held small business may not realize its full worth on the market. If your family does not have direct control of the business upon your death, the profits from the sale may not be sufficient to financially sustain them.
Most times, entrepreneurs begin the succession process by choosing who will be most likely to take over the operation: a partner, 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 imperative that you find a potential successor as soon as possible.
The most important part of an effective exit plan is the buy/sell agreement. This contract requires the estate of the deceased owner to pass ownership rights at a preset price to another party (family member, outsider, or business itself). This creates a market for the business interests of the former owner, it establishes value, and it allows for a successful changeover of the operation.
A buy/sell agreement is only as good as the funding available to carry it out. For this reason, most agreements stipulate how the purchase is to be funded. Since the agreement becomes effective at your death, life insurance may be the most sensible and most cost-effective option.
Finding the best method for a buy/sell is often a complicated matter. There are certain advantages related to your estate planning, operating control, and taxes that are offered with each method. The option you choose will mainly depend on the particular circumstance, and it should always be discussed with qualified specialists. In addition to your legal professional and accountant, your insurance agent will also have a major role in developing and implementing your succession plan.
Succession plans often change as time passes, so it is essential that your agreement is reviewed periodically to make certain that it continues to measure up to your needs. Using a proactive approach in relation to a buy/sell agreement, can help you maintain your wealth and allow your business to continue to provide for your clients, associates, employees, and family.
Your business may be so reliant on your contribution as an owner, that it could have little remaining value after you pass on. Also, any efforts to pass the operation on to family members may be thwarted by estate taxes (up to 49%), which could leave little choice for your successors but to liquidate. Although the business may still continue after your passing, finding a buyer may be difficult. In contrast to a publicly-traded company, a closely-held small business may not realize its full worth on the market. If your family does not have direct control of the business upon your death, the profits from the sale may not be sufficient to financially sustain them.
Most times, entrepreneurs begin the succession process by choosing who will be most likely to take over the operation: a partner, 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 imperative that you find a potential successor as soon as possible.
The most important part of an effective exit plan is the buy/sell agreement. This contract requires the estate of the deceased owner to pass ownership rights at a preset price to another party (family member, outsider, or business itself). This creates a market for the business interests of the former owner, it establishes value, and it allows for a successful changeover of the operation.
A buy/sell agreement is only as good as the funding available to carry it out. For this reason, most agreements stipulate how the purchase is to be funded. Since the agreement becomes effective at your death, life insurance may be the most sensible and most cost-effective option.
Finding the best method for a buy/sell is often a complicated matter. There are certain advantages related to your estate planning, operating control, and taxes that are offered with each method. The option you choose will mainly depend on the particular circumstance, and it should always be discussed with qualified specialists. In addition to your legal professional and accountant, your insurance agent will also have a major role in developing and implementing your succession plan.
Succession plans often change as time passes, so it is essential that your agreement is reviewed periodically to make certain that it continues to measure up to your needs. Using a proactive approach in relation to a buy/sell agreement, can help you maintain your wealth and allow your business to continue to provide for your clients, associates, employees, and family.
No comments:
Post a Comment