You should now recognize there are several problems that could derail the continuation of your business. A premature death could cause severe harships for your business in that you may be forced to bring in inexperienced heirs of a deceased partner or even worse forced to pay a salary to buy-out the deceased partners interests. Many even overlook the possibiliy that a long term disability could drain the cash reserves of your enterprise. However, before you start writing your Business Succession Plan, there are a few preliminary steps to consider.
All business plans are built around relationships. Thus it would be smart to form a team of trusted advisors to not only write but to implement your plan. From my experience, it would be sound sound advice to start with at least two or possibly three counselors. These would include a financial planner, an attorney and also an accountant. You may already have such advisors. However, your current consultants may not necessarily be part of this new team. Not only are there many plans available (we will be discussing all in future articles) but there are various funding options as well. Lets briefly discuss the advisors roles.
The financial planner should have three unique characteristics. The first criteria is to have experience in doing such plans. Additionally the planner should have a professional designation showing that they have taken and passed advanced courses, many of which include business succession plans. Lastly, this advisor should be independent. The ability to obtain proposals from many different companies is critical as costs could vary significantly between different companies.
Your attorney should have the expertise to draft a particular plan. Experience again is an important factor as it’s important to help the planner advise which plan is the best for your individual case. This professional should also have prototypes of these important documents as this could save you both money and time.
Finally it would be very productive to include a tax advisor. Many are well versed in doing your books and filing your tax returns. However, the implementation of a Business Succession Plan involves many tax issues. There are concerns of a step up in basis, transfer for value and exposure to the Alternative Minimum Tax (ATM) to name just a few.
As you can see, there are many issues in writing your plan. Consequently, it would be prudent to form a team, as each advisor plays a key role. In the long run, much time and money could be saved.