Most business owners work long hours focusing on their core business and efforts to improve their bottom line. This is the obvious priority for any owner of a small business. But what would happen to your business or to your employees if one of the following “triggering events” were to happen to you , the owner and key employee? These triggering events are death, disability, retirement and divorce. While the logical planning using just insurance to cover some of these risks seems easy, often the corresponding documents are not in place to assure that a plan is correctly executed. For example, have you completed a buy-sell agreement that is individualized to your situation and coordinates with your estate planning document? Do you have a written company standard for how long a shareholder or key employee is to receive salary if he or she becomes disabled and will not be returning to work for an extended time. Is your life insurance owned correctly to minimize income and estate taxes if the policy were to pay out at a premature death? Have all spouses signed your agreement as a pledge to receive cash for their shares rather than becoming partners in a business they may not understand or be interested in at this stage of their life. These are just some examples of areas of concern that are often over-looked by busy business owners. Make sure you create a team of professionals to coordinate your succession plan and test the results with real world stories that could happen to you. Your team may need to consist of an attorney, a financial advisor or life agent, your banker and your accountant. It is always better to create a plan you have designed rather than a default plan that may or may not serve you, your employees and your families.
Elizabeth Strong is a registered representative of Sigma Financial Corporation, member NASD/SIPC 303 Second Street # 950, San Francisco, Ca. 94107