The transition of a family owned or closely-held business is a significant undertaking even with the best laid plan. This article will outline the issues that should be considered by the business owner in transitioning a business.
Types of Business Succession Planning
A business succession plan should address two fundamental events – an unexpected death or disability of the business owner and a planned succession of the business. Planning for an unexpected death or disability generally takes the form of a “Buy-Sell” Agreement whereby another party, such as the business itself, another owner of the business, or a key employee, is obligated to purchase the ownership interest of the deceased or disabled owner. A planned succession of a business generally takes the form of a gift or sale to another owner, key employee, or family member.
Implementing a business succession plan is not easy. A considerable amount of time, energy, and thought must be put into a plan for it to be effective. The failure to establish or implement a business succession plan can be fatal to the continuity or survival of the business.
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