Jim Lorenzen, CFP®, AIF®
I can speak from personal experience on this one. I’ve been a business owner for thirty-seven years, owning seven different businesses in three different industries; and my wife’s former husband passed away (unexpectedly) after building a chain of seven quality restaurants that stretched from El Paso, Texas to Northern California.
Experience teaches preparation.
If you’re a business owner or a partner in a business, have you asked yourself what would happen to your business if something should happen to you? Death and disability, are possibilities even if we want to avoid the thought. And, of course, some want to retire.
Does the business simply stop? If so, that may cause a lot of equity to simply be flushed away.
Does your partner’s spouse inherit your partner’s share? Do you want that?
Every objective brings with it issues you should consider:
Retain the Business for Your Family
• Is there a capable and willing family member?
• Will the family member be acceptable to any other business owners?
• How will you or your surviving dependents replace the income previously provided by your business?
• Is there a need to equalize inheritances among family members?
• Will there be enough liquidity in your estate to pay taxes and other settlement costs?
Sell the Business
- To whom will your business interest be sold?
- At what price?
- What is the value of your business as a going concern?
- How does that value compare to the liquidation value of your business?
- How will you or your surviving dependents replace the income previously provided by your business?
Will there be sufficient funds available to allow for a planned liquidation?
- And at what events (death, disability and/or retirement)?
- What is the value of your business interest?
- Will the funds be available to complete the purchase at your death, disability and/or retirement?
Liquidate the Business
- What is the value of your business as a going concern?
- How does that value compare to the liquidation value of your business?
- How will you or your surviving dependents replace the income previously provided by your business.
- Will there be sufficient funds available to allow for a planned liquidation?
The objective of business continuation planning is to assist in evaluating which of these alternatives is most suitable for your situation and to help provide the funds that will be needed to assure that your business continuation goals become a reality.
Jim
