For small business owners that do not plan to pass the business down to the next generation, it is a good idea to plan ahead for the sale of the business in the event of your death or capacity. One option is to enter into a Buy-Sell agreement. A Buy-Sell agreement guarantees that you (or your loved ones) will receive the fair market value of your interest in the business in the event you, or your surviving loved ones, must sell it at a later date. In essence, a Buy-Sell agreement is a binding … [Read more...] about What is a Buy-Sell Agreement?
One popular method used to transfer ownership of your business from one generation to the next is to create a Family Limited Partnership (FLP). An FLP allows you to transfer your legal interest in the business to the next generation slowly, over time, while maintaining control over the day to day management of the operation until such time as you are ready to retire. In addition, you may be able to gain tax advantages by using an FLP to transfer interest in your business to future generations. … [Read more...] about What is a Family Limited Partnership?
When you should start thinking about transitioning ownership of the business depends, to a great extent, on whether you plan to pass it down to the next generation, sell your interest to a partner, or sell to a third party. If you plan to pass the business down to the next generation it is really never too soon to get started. On the other hand, if the business is to be sold upon your death or incapacity, you should be planning for that now to ensure that your loved ones receive the fair market … [Read more...] about Is it too soon to think about transitioning ownership?
Liquidity refers to cash assets or assets that can be readily converted to cash. Small business often lacks sufficient liquidity, particularly when they are relatively young businesses or when they are farm/ranch operations. All too often, the business’ assets are tied up in things such as equipment, supplies, merchandise, or livestock that cannot easily be converted to cash. In the event of your death, however, your entire estate could be subject to federal gift and estate taxes which are … [Read more...] about Why is liquidity important to a small business?
Management continuity is crucial for a small business. Small business owners often make the mistake of assuming that an adult child or senior employee is willing to take over the management of the business if necessary, only to find out too late that their assumption was wrong. Of equal importance is ensuring that the individual you designate to step in and take over has the requisite legal authority and practical capacity to do so. A well thought out succession plan will ensure that a … [Read more...] about What is management continuity?
As the owner of a small business, planning for the possibility of your own incapacity should be an essential component of your overall estate plan. The reality is that most small businesses cannot function for long without a strong leader. Moreover, the person you designate to step in for you must have the proper legal authority to act on your behalf. Although you may not wish to think about the possibility, you could be incapacitated tomorrow as a result of a catastrophic motor vehicle … [Read more...] about Why is incapacity planning important for a small business owner?
Because every business is unique, no two business succession plans are the same. Nevertheless, there are some common goals and objectives that most business owners try to achieve with their plan, including: Designating of someone to take over the immediate day to day control of your business if you are incapacitated tomorrow because of a catastrophic accident or debilitating illness. Ensuring that everyone impacted, including employees, business associates, and family, is prepared to … [Read more...] about What is included in a typical business succession plan?
As a business owner, you understand the importance of protecting your business from common threats such natural disasters, theft, and fire. That’s why you purchase insurance –to compensate you in the event of a loss caused by a covered event. Have you considered though what would happen to the business if something happened to you? Not only could your business suffer considerable economic losses in your absence, but the entire business could go under without you at the helm. Incorporating … [Read more...] about Why is business planning important?