Is This Your Situation: Concerned About Your Succession Plan

Here are some concerns you may want to consider:

1. What immediate effects would the unforeseen death or disability of owner have on the ongoing normal activities of the business?
2. What would the immediate effect be on the financial affairs of the business?
3. Who would sign the contracts or write the checks?

On a longer-term basis, what would the future of the business look like?

1. Is the presence of the owner essential for the continuation of the business?
2. What about the longer-term management of the business?
3. Is there a capable key manager or family member to step in?
4. What about ownership?
5. Can they afford the cost of caring for a disabled person or pay any estate tax that may be due?

Obviously, these are not pleasant issues to consider. But, for the benefit of the owner's family and the employees (and customers) of the business, some planning can make a large difference.
Here a few ideas:

• Make sure someone, in addition to the owner, is fully aware of the key aspects of the business. This includes everything from knowing the location of the company checkbook to knowing key customers and vendors.
• If there are other owners, consider some form of buy/sell agreement. Often, a relatively simple document can provide a framework for the sale of ownership with the least disruption. Sometimes, insurance contracts can be part of the plan.
• Make sure the estate plan of the owner is up to date. With the success of many companies, many surviving family members are forced into company sale decisions just to pay estate taxes.
• Finally, make sure that the key individuals, whether they are family members, important employees, partners or trusted advisors, are aware of your wishes, thoughts and ideas. Some frank discussion may help everyone deal better with an unexpected death or disability.