The business ‘will’
By using this strategy, you can maintain control over your business if one of your business partners unexpectedly dies, is permanently disabled or suffers a critical illness.
If this happens, the following issues will be relevant:
How is the interest of the outgoing owner to be dealt
with?
Will the dependants of a deceased owner become the surviving owner’s new business partners, or will the surviving owner(s) need to negotiate to buy them out?
Where will the money come from to fund a buy out?
When this occurs, the expectations and intentions of the surviving owner(s) may be quite different from those of the outgoing owner (or the incoming spouse or beneficiary as the new part owner). For example, the surviving owner(s) might want to buy out the interest of the outgoing owner/spouse. However, the outgoing owner (or that person’s representatives):
May not want to sell; or
May want to sell, but to someone other than the surviving owner(s) - they may even sell their interest in the business to a competitor; or
May want to sell, but at a price the surviving owner(s) do not consider reasonable.
All of these scenarios can put extra pressure on a business. To assist in protecting business owners from these threats, a Business Succession plan should be considered. It makes good business sense to plan ahead.
The benefits
A funded Buy/Sell agreement can provide immediate funds to enable the purchase of the deceased’s/disabled’s share of the business.
Provides a guaranteed market for the business interest at an agreed price, protecting the value of your share of the business.
Provides peace of mind for the continuing partners/owners/shareholders.
Can pacify creditors and stabilise the business.
Can reduce the chance of disputes between continuing business owners and a deceased owner’s estate.
For more information contact us by phone (08) 8279 3333 or by email
