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Business Continuation

In all cases of business continuation (or business disposition), the plan will depend on MONEY. For purposes of this article, we will assume the need arises out of the death of a business owner or partner; disability should be reviewed under disability buyout protection.

Many times, plans for business continuation are made that seemingly defy logic, or rely on miracles. For instance, a plan that depends upon future business income may be made; this kind of thinking depends upon the not-so-convincing logic that the surviving partners or shareholders will make more money with one of the present principals gone! This is rarely, if ever, true. A loss of a partner very often results in the business being hurt due to the loss of the expertise of the partner. This is not a good time, therefore, to plan to use business income to defray additional costs and expenses.

Whether any planning has been done or not, the heirs of the deceased partner will expect to receive money, and a fair market value at that. They may look for a continuation of the decedent's income, or payment of the ownership interest. The easiest way to supply this liquidity is by use of life insurance, purchased for as little as 2% of net worth, payable at the time money is needed. [next]