“Taking steps now to protect the future of your business in the event of the loss of a business partner, key-employee or yourself due to an illness, injury or death is important.”
We strive to protect the assets and income of business owners by proactively determining their goals and desires while actively working at the business and for when they decide to transition it to the next generation.
Today, 62 percent of business owners have never had their business valued and only 36 percent of growing businesses have an exit or continuation plan in place. Of those 36 percent with an exit plan, only two in 10 have a plan that protects in the event of an owner’s death. And, only slightly more than one in 10 have a buy-sell agreement which protects the owners in the event of a disability. And of those who have a buy-sell agreement, many have not put the proper funding mechanism in place. These numbers are unexpected and concerning.
Here are areas of concern.
- Who in your business is critical to the ongoing success of your business?
- Would your profits be affected if a key employee were to leave, die or become disabled?
- Would you be interested in a plan that might reduce the risk of a competitor luring a key employee away from your business? (executive benefits, stay bonus, deferred comp etc.)?
- Are you aware of the business accounting saying “If you can’t get a tax deduction, get cost recovery”? Would you like to discuss this?
- Where do you see your business in 10, 20, 30 years? Are you still running it?
- Whom do you see running the business when you leave? Outside third party? Key employee? Family member?
- How do you see the business transferring? Lump sum payment or an installment sale?
- If transferring to a key employee, are you interested in helping to ensure he or she has the liquidity for at least a down payment?
- What personal disability income insurance do you have in place?
- Do you have a plan in place to cover your overhead expense (rent, utilities, employee wages, depreciation, taxes, insurance etc.) in the event you or your partner should become disabled?
- What are your proposed revenue sources for retirement? Do you have a qualified plan in place? If so, are you and your key employees limited in what you can contribute?
- If your business is your retirement, how do you see the money flowing our of the business? Would it put a strain on the cash flow?
- When was the last time you did a needs analysis or reviewed your personal coverages (life, insurance, income disability insurance etc.) to determine how much your family would need if you were to die?
- Have you thought about using business funds to finance the personal protection your family needs?
- Recognizing that your business is a big part of your wealth and your estate, do you have family members who are in the business, and others who are not in the business that expect a piece of the business as a part of their inheritance?
- Are you concerned about “estate equalization” for those who are not in the business?
- Are you concerned with potential taxes owed by your beneficiaries as the business and other estate assets transfer to your loved ones?
These are all great questions every business owner should be asking themselves. The solutions can be simple as providing protection for a key-employee or more complicated where a buy-sell agreement needs to be reviewed and a business evaluation needs to be done.
Regardless to the complexity, our team is able to help our clients identify their needs and provide competitive, strategic, tax-efficient solutions.
Next Steps ...
To learn more about how we can help, contact us with your questions or to set up a time to visit.