My financial advisor friends and I never cease to be amazed at how many business owners don’t have a Buy-Sell Agreement. It’s like going out in the rain without an umbrella. Business owners know they should have a Buy-Sell Agreement but they procrastinate. Partly because they’re too busy, partly because they’re scared of the cost, and also maybe because they don’t want to face their own mortality. Well . . .
Is now the time?
One thing this pandemic has taught us is that we should always have our affairs in order and a plan to deal with contingencies.
So maybe now’s the time to finally do your Buy-Sell Agreement. Do you really want to find yourself in business with your late partner’s spouse? (Or your divorced partner’s ex-spouse?). Do you want your spouse to have to run your half of the business after you’re gone? Or would you rather he or she get bought out by your partner(s)?
A Buy-Sell Agreement can also help you obtain liquidity from your investment in your business, as I described in my previous post Building Liquidity Into Your Buy-Sell.
Or maybe you’re a solo owner with no partners, so a Buy-Sell Agreement doesn’t make sense. There are still many ways you can protect your business and your family should something happen to you. I call it the “Hit by a Bus Plan” (although maybe I should change the title to the “Hit by COVID-19 Plan”). This plan involves interim operating instructions for whoever has to run the business during your absence, transition instructions for your spouse, a salary continuation plan for your family to continue receiving money from the business to pay their expenses, and a key employee retention plan, which in some cases can involve a key employee buying the business from your spouse after you’re gone. For more information about the Hit by a Bus Plan, click here.
Maybe now’s the time to finally adopt a Hit by a Bus Plan to protect your business, your employees, and your family.
Feel free to contact me or your legal adviser if you feel like now’s the time to finally do your Buy-Sell Agreement or Hit by a Bus Plan. Or forward this email to a business owner you know, who might find it helpful. Best wishes and stay healthy!
This article is not intended and should not be relied upon as legal or tax advice pertaining to any specific matter. You are encouraged to seek competent legal and tax counsel before proceeding with any transaction involving any of the matters discussed above.