Importance
of a Business Continuation Plan
Competing
Interests of Heirs and Surviving Owners
These
interests are many and may include the following.
|
What
Heirs of Deceased Owner Want
|
What
Surviving Owners Want
|
|
|
Top
Dollar for their interests
|
Minimum
cost for their interests
|
|
|
Prompt
settlement of the estate
|
Prompt
transfer of the business interest
|
|
|
Set
value of business for estate tax purposes
|
Full
control of the business no interference from decedents family
|
|
|
Relief
for family of worries regarding the business and its creditors
|
Continuing
line of credit
|
|
|
Retention
of customers and employees
|
|
Potential
Problems Without a Written Agreement
Frequent
results include:
Heated conflicts among the remaining owners and the decedent's family;
Unhappiness on all sides, and sometimes litigation;
Delays in settling the estate and continuing business growth;
Loss of customers; and
Possible liquidation of the business which may bring less than full
value.
The Solution: A Written Agreement
(and cash)
Taking
time now to see that the business will pass in an orderly manner at time
of death will benefit all parties and their heirs. A written agreement can
provide:
An orderly transfer of the business;
A mutually agreeable sales price;
Mutually agreeable terms of sale;
A value that is binding on the IRS for federal estate tax purposes1;
and
Stability for customers, staff, creditors and investors.
An agreement which is favorable to all parties can be more easily drafted
prior to a crisis.
1
Under the Tax Act of 2001, the federal estate tax is gradually phased out
until its final repeal in the year 2010. If Congress does not act at that
time to repeal it for the years following, it will automatically revert
back to the rates in effect during the year 2001, with an exemption for
the first $1,000,000 of assets.
Continue for more information:
Commonly
Asked Business Continuation Questions
|
