Ask any expert in business continuation planning: When they’re not prepared for thoughtfully, business ownership transfers can be a seeding ground for conflict – and create serious rifts – between business owners. That’s because there are so many aspects to consider, including management dynamics, management succession, strategic business planning, and risk management. And particularly when a business is owned by multiple partners, each owner’s financial, estate, and tax planning are integral elements as well.
Clear communications, and exacting planning, are essential to ensure that your business will survive to the next generation. And that you and your partners can continue to operate your business effectively in the near term.
Buy-sell agreements can serve as a cornerstone of an orderly succession planning process. If you and your business partners agree that keeping ownership among your current partners is the right way to go, then backing that agreement with a business continuation insurance policy or policies can provide the business with both solid ground rules and appropriate financial tools.
But what about transferring your share of the business to a family member in the future? Or willing it to one or more of your children? Or selling it to someone outside the company whose skills could add value to the business? Or to a current key employee? These are all opportunities that can have highly successful outcomes if you lay the proper groundwork.
Your first task is to work through succession concerns with your current partners and with your family. If, for example, the business is to be transferred to family members, these successors should be getting involved in its operations today, to avoid conflicts down the line. The point is, there are many ways to structure and support successful business continuation strategies, but only one path into the process. It begins with careful planning and buy-in from you and all your co-owners in your business.