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Home > Business Consulting > Business Continuation Programs
Business Continuation Programs
The Importance of A Business Continuation Plan

Competing Interests Of Heirs And Surviving Owners

What Heirs of Deceased Owner Want:

>Top dollar for their investments.
>Prompt settlement of the estate.
>Set value of business for estate taxes purposes.
>Relief for family of worries regarding the business and its creditors.

What Surviving Owners Want:

>Minimum cost for the interest.
>Prompt transfer of the business interest.
>Full control of the business - no interference from decedent's family.
>Continuing line of credit.
>Retention of customers and employees

Chaos Results Without A written Agreement

Frequent results include:

A. Heated conflicts among the remaining owners and the decedent's family
B. Unhappiness on all sided, and sometimes litigation
C. Delays in settling the estate and continuing business growth
D. Loss of customers
E. Possible liquidation of the business which may bring only pennies on the dollar

The Solution: A Written Agreement (And Cash)

Taking the time now to see that the business will pass in an orderly manner at time of death will benefit all parties and their heirs. A written agreement can provide:

A. An orderly transfer of the business
B. A mutually agreeable sales price
C. Mutually agreeable terms of sale
D. A value that is binding on the IRS for federal estate tax purposes
E. Stability for customers, staff, creditors and investors

An agreement which is favorable to all parties can be more easily drafted prior to a crisis. These agreements might be some of the following:

A. Buy-Sell Agreement for both individual owners, partnerships and corporations B. Cross-Purchase Buy-Sell Agreement
C. Cross-Purchase Buy-Sell Agreement Three or More Owners
D. Stock Redemption Plan
E. Wait and See Buy Sell Agreement

Buy-Sell agreements must be acceptable to the IRS (IRC Sec. 2703) It must also be decided on what method will be used to fund the buy-sell agreement.

There is much to be considered when putting together a Business Continuation Plan. The above is only the beginning.
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