Beneficial For Business Owners to Have A Succession Plan
For a client who was in the minority and did have a succession plan for his business, things still did not go exactly as planned. Three men had been successful in the construction industry and they created a plan that they funded with life insurance.
Over time, the construction industry experienced a decline, the business became unprofitable and one of the main partners passed away. The remaining owners turned to the plan that had been drawn up to see what the next step should be.
The remaining partners had to compromise with the surviving spouse of the business partner. Both had expectations from the floundering business. The company was valueless at this point because it owed more than it had made. There could have been litigation over the money that the two surviving partners were owed and the money that the surviving spouse of the deceased partner expected to get. Instead all parties reached an agreement in line with the written plan and the spirit of the partnership.
See Peggy Hoyt, Creating an Exit or Succession Plan for Your Business, WealthCounsel, Dec. 28, 2011.
Special thanks to Jim Hillhouse (WealthCounsel) for bringing this article to my attention.