Studies show that businesses often fail for two reasons: lack of capital and mismanagement. The loss of a key owner has been the downfall of many businesses for precisely those two reasons. 

To beat the odds, business owners should take great care to have a sound business continuation plan that focuses on resuming and continuing the management of operations in the event of their retirement, permanent disability or death. Business continuation planning goes beyond contingency planning to documentation of actions to be taken, resources required and procedures to be followed to ensure continued availability of essential services, programs, systems and operations in the event of an unexpected interruption.

The options available to you in such an event, normally include one of the following: liquidation; retention of the business for the owner's family; or sale of the business. However, there is a major difference between exercising these options in an unplanned manner, and creating a plan. Without a plan, the departing owner or owner's survivors stand to lose both value and income from the owner's investment in the business and the remaining owners stand to lose some or all of their investment or to see their control diluted.

What it Includes

Succession planning

Buy/sell agreements

Life insurance options

Split dollar funding techniques

Trust options

Tax-efficient insurance

Succession planning consultants

Accomplishing the orderly liquidation, retention or sale of a business requires:

• Planning� This must take place before the retirement, disability or death of an owner.
• Appropriate documentation�This involves the development of a written business continuation plan that specifies what will happen to each owner's interest when he or she leaves the business due to retirement, disability or death. The plan should also indicate the value of each owner's interest.
• Adequate funding�This is critical if a departing owner's interest will be purchased by the business or by the remaining owners. Without funding, there is no way to guarantee the plan can be implemented when the time comes for an owner to leave. Life insurance is one way to effectively fund a business continuation plan.

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