Business Continuation Strategies
When a business owner dies, a myriad of potential problems can occur.
1. The surviving owners want to retain total control of the business without the interference from the deceased owner's heirs. They hope for a prompt transfer of the deceased owner's interest at a fair price to the surviving owners. They want to retain the loyalty and support of employees, customers and creditors during and after the transition in ownership.
2. The deceased owner's heirs want ongoing financial security after the loss of the deceased's salary and benefits. They may anticipate either retention of the business interest by family members or a prompt sale of the interest at an attractive price. The expect prompt settlement of the deceased's estate - including proper tax-valuation of the business interest, if it's to be sold.
Conflicts and possibly litigation might arise between the deceased owner's heirs and the surviving owners. Delays in the transition to successor ownership and in settling the deceased owner's estate might be inevitable. There can be potential loss of customers, employees and creditor confidence that can damage the business and, possibly, even force its liquidation.
The solution to these problems is a formal, written buy-sell agreement among the business owners. It is the first step in assuring an orderly and successful transition in business ownership following an owner's death.