Business continuation planning is developing and implementing a plan of succession. Through what is usually called a Buy-Sell Agreement, proper business continuation planning will determine who will take over your business if you die prematurely, become disabled or retire. Ensuring the continuation of your business with a properly drafted Buy-Sell Agreement will provide more than just a mechanism for transferring the business. It may save you thousands of dollars and hours of time by eliminating the costs, delays and frustration of IRS contests and litigation. When properly drafted, a Buy-Sell Agreement will establish the value of a business for the purposes of federal estate and gift taxes.
A few examples of the types of Buy-Sell Agreements are:
- Entity: The business entity agrees to purchase the interests of the individual owners.
- Cross purchase: All of the owners of the business agree to purchase the share of any owners.
- Wait and see: The owners and the business agree that either the owners or the business will have the first option to buy the interests of the owners who leave, depending on which is most advantageous.
- Disability: This guarantees the sale and purchase of a business interest in the event of an owner's total disability. It can be set up as either an Entity or Cross-Purchase plan.
Depending upon the legal entity of your business, a Buy-Sell Agreement can be established between you and your partners, your business and its shareholders, you and other family members or you and a key employee or employees.
FIRSTGATE recognizes the need to bring business owners the planning tools and guidance that will result in smooth transitions and successful business continuity into the next generation. We have the expertise to not only structure the proper agreement but provide excellent resources for funding the agreement.