Regardless of the type of business you own, your death will, without a doubt, bring about a lot of emotion and stress in you family and in your business.
Sometimes, the death of the family patriarch/matriarch business owner creates drama that will negatively impact your business, or even lead to its demise. Proper business succession planning can prevent drama from sinking the ship.
Here are ways to mitigate problems and fulfill a business owner’s wishes after they’re gone:
Buy-Sell Agreements. The business will, so-to-speak, is a buy-sell agreement. They let you choose how your business will be valued, how it will be distributed, and who will be able to take the baton after you’re gone. It may not prevent the emotion, but it will set forth a clear path for business succession and success.
Escrow and Trusts. If trust is lacking between your heirs, planning techniques can effectuate a stock trasfer without much issue. An escrow account or trust can hold your business interest until the terms of the transaction are met.
Pre-funding. If cashflow is tight when you pass, the original terms of the business succession can go up in flames. But, if the transfer is already funded, with life insurance or cash, the transaction is more likely to go forward. Term life insurance is commonly used for this purpose. That way there is no strain on cashflow to buy out your heirs.
Whichever mechanism you use, business succession planning is important to the overall successful transition of your business.