Business Succession Planning
Many business owners fail to address their exit strategy. They spend their lives building their businesses, yet all of their hard work can be destroyed unless a business exit agreement (or “Business Will”) is in place.
A Business Exit Agreement is a contract entered into between business partners. It provides for what the surviving partners are bound to do to buy out the outgoing / non-surviving partner’s interest in the business should a specific event occur. (“the Exit Event”)
Business Exit Events:
• Permanent Disability
If you have failed to plan for any of these events, significant and unexpected results may occur, such as:
• You may find yourself in business with your partner’s spouse/ estate/ family who may demand involvement in the business
• The estate/ family may demand that the business be wound up and their share distributed
• The value placed on the outgoing party’s share in the business may be unrealistic
• The estate/ family may be forced into accepting a reduced payout amount for the value of the business equity
• Creditors may call in outstanding amounts
• Credit may be restricted if the lending institution perceives that the loss of the “key man” has resulted in diminished financial capacity
• The business may lose clients if the exit event is not handled smoothly and the interruption of their services is not minimised.
A business exit agreement cannot prevent exit events from occurring but it can ensure that adequate funding and mechanisms for the transfer to occur are in place
We work together with your accountant and other advisors to ensure an integrated strategy and agreement is reached.