Business Continuation
Commonly Asked Business Continuation Questions The following are commonly asked business continuation questions. Each question is followed by an answer that highlights the issues involved and the importance of taking action. Question: What's the problem? Answer: Think about the essence of a closely held business. If it's like most firms, it has these characteristics. The majority stockholders operate the business. The majority stockholders receive most of their income from salary or bonuses. Stockholders have limited creditor liabilities. If a stockholder were to die or become permanently disabled, the legal structure of the business would survive. If a stockholder were to die or become permanently disabled, the personnel structure would be significantly changed. The problem is, when a business owner dies, the business often dies too: not because anything wrong has been done but because nothing has been done, and that's wrong! At death (or disability), no asset tends to deteriorate as quickly or as totally as a business. Often, the precipitous drop in value is staggering! Think about it. If a friend owned a car or a home or almost any other tangible asset, one month after that friend died, the value of that car or home would be relatively the same. But if the friend owned a restaurant that didn't reopen for a month or was a doctor whose practice was closed for a month or owned a manufacturing plant which produced no goods for a month, what would the business be worth at the end of that month? Question: Why can't leaving the business to the proper parties in a will solve the problem? Answer: Leaving the business to successors at death through will provisions does not answer the key problems. A disgruntled heir or a dissatisfied spouse may attack a will. Often, part of the business ends up in the hands of inactive heirs who can add little to the business but who want income equal to working stockholders. The result is an increased probability of business failure and inevitable family discord. Most importantly, a will cannot address the central problems created when a business owner dies or becomes permanently disabled. Continue for more information: More Commonly Asked Business Continuation Questions