Stop Succession Nightmares Before They Start
A clear succession plan keeps your business - and its legacy - alive, even after you're gone.
Here's what you need to know:
A Buy-Sell Agreement helps prevent that uncertainty by clearly spelling out what happens to ownership and control when a major change occurs.
Think of it like a business version of a will - it protects both your company and your loved ones. Without one, your business could end up in the hands of unprepared heirs, inactive partners, or even outsiders. And for small business owners, that risk is especially high since personal and professional assets are often closely tied.
What a Buy-Sell Agreement Can Do For You
A Buy-Sell Agreement is a legal contract between co-owners (or between an owner and the business itself) that sets the rules for what happens if an owner leaves the business. It typically covers:
Triggers: Events like death, disability, retirement, or voluntary sale.
Valuation: How the business will be appraised and what the departing owner's share is worth.
Funding: How the purchase will be paid for - often through life insurance or structured payments.
Transfer terms: Who can buy the ownership stake and under what conditions?
Even solo owners can benefit. If you're the only owner, a succession plan outlines what happens to your business - whether it's sold, passed on to family, or dissolved.
A well-written Buy-Sell Agreement not only prevents disputes but also reassures employees, investors, and customers that your business will continue to operate smoothly, no matter what happens.
Questions SMBs Should Be Asking About Succession Plans
Before drafting or updating your succession plan, ask yourself a few key questions:
What happens to my business if I can't run it? Would I want a family member, partner, or employee to take over?
How will my business be valued if I retire or pass away? Do I have a formula or appraisal method everyone agrees on?
Who has the right - or obligation - to buy my share? Have we discussed funding options or insurance coverage?
What legal documents back up my intentions? Do my will, operating agreement, and buy-sell contact all align?
What to do Next
1. Review your ownership documents
2. Draft or update a buy-sell agreement
Smart planning today prevents chaos tomorrow. Taking time to set clear rules now ensures your business - and its future - stay in the right hands.
This document is designed for general information only. The information presented in this document should not be construed to be formal legal or tax advice nor the formation of a lawyer/client.
For further information please contact me at www.kmckernanlaw.com kevin@kmckernan.com or 718-317-5007.