If you have a business with a partner or partners you need a fully funded buy sell agreement. It should be set up before any partners pass away, become disabled or find out they have cancer, diabetes, or other ailments that can limit workable solutions. Doing so is not only cost effective but it provides peace of mind.
Why? Do you want your current partner’s spouse and children as your new business partners? Nice enough people, but are they qualified and willing at the drop of a hat to run the business?
Moreover, what will happen to the value of the business if something happens to a partner? A business valued at $5 million can quickly drop to $2 million without proper planning.
Then what happens when a partner passes away, the estate is valued incorrectly and the IRS comes looking for more then what was paid in estate taxes by the heirs? I’ll tell you. Litigation with the heirs.
And of course, divorce never happens to business owners. In all of these scenarios, doing nothing ahead of time is a bad business decision. I can’t tell you how many calls I’ve made to owners who don’t have fully funded agreements. They’ll say, “I’m all taken care of.” But when you look at what happens to many businesses after a life event, you realize they were just blowing me off.
The real blow off was on them. They blew off serious business planning they never even thought about because they were busy running the business. Fair enough. But they can’t do that or bury their heads in the sand because they still need to address the complex issues that arise when life events happen. Otherwise, like it or not, a business may be forced to close.
The main reason owners want to have the agreement fully funded is because for most businesses, using cash on hand, a sinking fund or financing through a bank loan may be undesirable or unavailable as a solution. Therefore work with the right team to provide the best funding solution.
Now after you set this up, get back to marketing and selling!
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