Business Succession Planning
Many a successful business operates as a small partnership or company with two or three principal operators. These businesses can become quite large. What happens in the event of death or illness of one of the partners?
The Business Succession Process goes through a number of steps including:
- Identify the contribution of each partner
- Identify the risk to the business from death or disability of each person
- Identify methods of overcoming the problem
- Identify methods of funding that solution
Often these arrangements will involve a âBuy/Sell Agreementâ, where the continuing partners agree to buy out the disabled or deceased partner for an agreed sum or for a sum to be determined by an agreed method e.g. determined by the groupâs accountant.
These arrangements are then linked with insurance for death and disability so that the continuing partners will have adequate funding to pay out the disabled or deceased partner.
These arrangements provide certainty for all parties, ensuring that:
- the disabled partner or their bereaved family will know with certainty their entitlements from the business
- the continuing partners know with certainty that, they can compel by payment of a fixed sum the acquisition of the former partnerâs interest, eliminating the prospect of their former partnerâs spouse or family member stepping in as executor or seeking the winding up of a business
It is a win/win situation for all, but there are complex legal and taxation issues to be considered. The team at P.M. Lee & Co. Lawyers have provided many such business succession arrangements for our clients and we would be happy to apply that knowledge for your business.
Call us today on +61 3186 6666 or email firstname.lastname@example.org for any enquiries.