When writing your Business Succession, Buy Sell Agreement, using a set of questions helps you clarify what you’d like to happen to your business. These questions fall in three categories; You and Your Interest in the business, Your Co-owners/partners in the business and Not being Able to be in the business.
YOUR INTEREST IN YOUR BUSINESS
1. If you passed away today, what would happen to your business?
2. When you eventually pass on, what would you like to see happen to your business?
3. What will happen to your salary? When you pass away your salary can not automatically continue to your family unless they perform substantial duties to the business. Thus, for substantial economic reasons, it’s of prime importance to write a Business Succession Plan.
4. If you have co-owners, will they take care of your family? Often your heirs and co-owners may have conflicting interests. Your family may understandably want INCOME from the business while the surviving co-owners may wish to plow profits back into the business. See yet another need for Business Succession?
5. Are family members involved in your business and if so, could they assume control of your business and/or take your place? Here is a good example of the term, Business Succession.
6. Do you have you a WILL or REVOCABLE LIVING TRUST? If so, is it part of an overall Estate Plan?
7. When deceased, often a Business will be sold. How will your family receive a fair price for your business value? Additionally, will your family receive just compensation in a timely manner?
8. Have you considered Death Taxes? You may not have a federal estate tax liability as you and if married, your spouse EACH have an exclusion of $5,250,000. However, in New York State, the estate tax kicks in for amounts above $1,000,000. Keep in mind this includes EVERTYHTING YOU OWN ( Home, Your Value in Business, Retirement Accounts, Savings, Rental Properties and other assets).
All these factors play a significant role in drafting your Business Succession Plan.
Next we’ll deal with You and Your Co-Owners.