Business Continuation: Do You Have a Will for Your Business?
Eventually you and your business will part ways, likely because you retire or pass on. What would you like to happen to your business?
A little planning now goes a long ways in comforting your loved ones and employees when the time comes. In fact, this is an easy step that most business owners over look.
Retirement
There are a few questions to be asked:
Is there a family member that would be able and willing to buy the business? A key employee? A local competitor?
You may or may not know the answer to the question at this time. In either case, there is some planning that should be completed right now.
How would you finance the transaction?
Would the buyer be required to get bank financing or will you sell it on an installment basis? If you finance part of the cost yourself, what guarantees do you have in place if the buyer dies or gets sick?
What is the business worth?
Are you "the business" or can it profitably operate without you as a going concern? What are the business assets worth? You should have a general idea as to your business's selling price.
Death
If you weren't here tomorrow, what would your family do with the business? They would have three choices:
1. Liquidate It: This is usually the most costly option. Your family would sell off the assets, usually for pennies on the dollar, and keep what's left.
2. Sell It: Would your family be able to find a suitable buyer? Do you think your spouse would know enough to negotiate a price that reflects what the business is actually worth? If you weren't there, would the business be profitable and would your family have enough time to find a buyer before funds get low?
3. Keep It: Does your will authorize anyone to open the doors tomorrow if you are not there? Is any member of your family capable of running the business? Would the business suffer in profitability if you weren't there?
By putting some planning in place now, you can insure your family and your employees will be taken care of if something unfortunate was to happen.
Do you have a business partner?
If you have a business partner, what would happen if your partner wasn't there tomorrow. What would happen to his or her shares? Do you have a written agreement in place that allows you to buy your partner's shares at a predetermined price? If not, you may find yourself in business with your partner's spouse!
Do You Have Business Debt?
If you have business debt, you may want to have a life insurance policy that will erase those debts if something were to happen (some banks even require this to get a loan). Also, if a family member were to step in, would the bank be confident enough to extend them a loan if it were necessary? A key person life insurance policy may be a good idea to provide funds during a difficult time.
