Protecting Your Business from Unforeseen Events.

It is difficult enough planning for the foreseeable events in life, let alone those you don't expect.
But a proper business succession plan will go a long way in assisting you to
address those potential risks (and those you don't anticipate).

Protection in the Event of Death or Disability.

Premature death and disability is something you have to consider if you want to protect the long-term financial health of your business.
This is never more so, than when you are considering a transfer of your ownership to new family members.
After all, you want to ensure that your pension and family income is secure for a great many years.

Death and disability protection within a business goes beyond the realm of personal life insurance.
Whilst these products do pay a key role in providing instant money to secure your and your dependants future, there are many other issues you need to consider.
In the event of a life-changing event happening to you, a partner, shareholder, or keyperson you want to ensure that;

• You have an effective Buy and Sell agreement that will ensure the smooth transition of ownership interests.
• Your will, living will and powers of attorney are coordinated with your succession plan and that provisions are made for any trusts you may have.
• You have provided the vital finance to ensure the continuation of the business through the transition period as well as to enable successors to purchase an interest if need be.
• Your loss of profit or retraction of credit as a result of death or disability are minimised.

You succession plan also needs to provide clarity on what happens to ownership in the event of;

• The retirement of an owner.
• A non-resolvable dispute.
• A marital breakdown, where a spouse becomes entitled to a share in your business.
• Insolvency of an owner.
• Any illegal actions of an owner.

Here are some questions you need answered;

• In the event of death or disability, will the business be liquidated, sold or given to family members or sold to third parties?

Liquidating and selling the assets.

• For how much would you sell the business today?
• How much would the business lose in a forced liquidation versus for what it would have sold as a going business?
• Do you have any other business-related debts?
  Do you want to pass them along to your heirs or eliminate them at your death?
• What arrangements have you made to see that your objectives are carried out?

Keep it in the family.

• Which family members would you like to own your share of the business?
• Who would run the business on a day-to-day basis in your place?
• Have you talked to him or her about it, and is he willing and able to run the business?
• Are your heirs and the surviving owners compatible?
• Do your creditors know about your plans, and have they agreed to maintain their business credit account with someone else in charge?
• How much annual profit or loss do you estimate in the next five years?
• Would you want to guarantee these profits to your family, and if so, for how long?
• Would your death cause other outstanding monetary needs?

Selling the business.

• To whom would you sell your share?
  Are they willing to buy?
  What would the price and payment terms be?
  How will it be funded?
  Would the buyout be a legally enforceable agreement?

Other questions.

• What amount of income would you or your family need in the event of you suffering a life-changing event?
  Do you want to guarantee this income and if so, for how long?
• What degree of business interest will be needed to meet your or your family's need for ongoing income?
• Will that need be provided by a continuing income from the business?
  Or from a lump sum of capital?
• If there will be a shortfall, what contingency plans do you have to make up the difference?
• Do you have a Buy and Sell agreement for partners and shareholders?
• Do you have sufficient insurance to provide the capital for the purchase of your business interest on death or disability?
• Is there a need to reduce or eliminate business debt on your death or disability?
• What tax will arise (e.g. CGT)?
• Do you have an up-to-date Power of Attorney?
• Are you aware of the legal consequences of family law, especially with regards to marriage?

These are but some of the issues you are faced with in formulating a business succession plan for a family business; in the event of death or disability.
If you have any concerns about your business, please call me urgently.

Interested? Then please call or email me NOW!! Cell: 083 377 8893

Don't leave your concern here. Call me for advice - no obligation!

Especially if you want to Protect Your Business.

pyburn@peterpyburn.co.za