Ah Spring…. Flowers blooming, warmer weather, and the feeling of renewal and rejuvenation. It also brings everyone’s favorite pastime…”spring cleaning”! I know, I know, cleaning out the garage and straightening up the attic is not the most exciting way to spend a Saturday. All jokes aside though, Spring is an energizing time of the year and one that lends itself to reflection and reassessment.
If you are a business owner, in this time of “spring cleaning”, why not take some time to review something with potentially significant ramifications to you and your business partner(s): your buy-sell agreement. A well-constructed buy-sell agreement is an essential component of a stable, sustainable business and estate plan. Among other things, it defines the events that trigger the right or obligation to buy or sell, it determines the method for valuing the business, and it provides for the orderly transfer of a business interest. But chances are, if you are like many business owners, a plan was drafted when you started your business and you have filed it away never to have looked at it since.
As we all know, things have a way of changing, and this is especially true with small businesses. That being said, here are several reasons to review your buy-sell agreement periodically:
- The value of the business may have changed significantly
- The marital status of owners may have changed
- The agreement may not address all key triggers such as disability, retirement, divorce, voluntary termination, etc.
- The agreement may not be funded, could be underfunded or perhaps existing insurance policies are in need of review
- Children may have entered the business
- The health of one or more of the owners may have changed
- New entities may have been set up as the business has evolved
As advisors to businesses and business owners for 50 years, The Benefit Company has witnessed the negative complications that can arise from outdated business continuation plans. The results can be devastating to both the surviving business owner and the deceased owner’s family. The good news is that many of these pitfalls can be avoided with a simple review on a periodic basis. In this time of “spring cleaning”, take a moment to review your agreement with your business partners and counsel.
We trust it will be a worthwhile use of your time…even better than cleaning out your garage.
The Benefit Company