10-15 Years
Till Retirement and
No Exit in Sight
Y
A 2000 study by the our business isnt just your
pride and joy but a major
US Small Business source of income for you, your
Administration found family, and your employees. While
the business is a large part of your life
that only 30% of today, the reality is that someday you
may want to retire, step back from the
businesses successfully business to concentrate on new ven-
pass to the second tures, or you could become disabled or
unexpectedly pass away.
generation. What would happen to your busi-
ness if you were no longer around to
run it? Putting an effective succession
plan into place allows you to take the
guesswork out of transferring owner-
ship, and provides peace of mind that
your business, and your family, is taken
care of.
If youre like most business own-
ers, you may plan to pass your business
on to your family or sell it to co-own-
ers. In a 2000 study by the US Small
Business Administration, however, it
found that only 30% of businesses suc-
cessfully pass to the second generation.
A major reason for this is the tax costs
of passing on ownership.
What constitutes an effective suc-
cession plan depends on your particular
objectives. Every plan begins with you
deciding how you want to transfer your
business. Based on those objectives,
there are many strategies that will help
you assure a smooth and complete tran-
sition of your business to new manage-
ment and will control the tax burden for
the new owners.
Business continuation planning
simply means planning for the transfer
of business ownership and management
from the current owner to someone
34
34exitNew.indd 34
by David Eckerdt
Princor Financial Services Corporation
else. There are a number of good rea-
sons why owners should plan for the
transfer of their businesses, such as
preventing their business from passing
to underqualified owners, protecting
key employees, or raising cash.
But most of the time the planning
is done simply to keep the dream alive
to make sure the business extends
beyond the owners lifetime. Few busi-
ness owners work for a lifetime only to
consciously decide to let their business
dissolve when theyre no longer able to
manage it.
Every business owner should con-
sider having a buy-sell agreement to
assure the continuation of the business
and to protect the owner and his or her
family. But owners frequently dont
know what they want to do, nor do they
understand the various options open
to them. Buy-sell agreements work
no matter what form a business takes:
sole proprietorship, partnership, LLC,
C-corporation or S-corporation.
Beyond taking that all-important
first step and getting the agreement
set up, having the dollars available
to make the transfer happen is also
key. Generally, the most convenient
and least expensive method of funding
the buy-sell agreement is through life
insurance. Buy-sell agreements funded
with life insurance offer these benefits:
1. Help establish a value for the
business
2. Provide liquidity to support the
family
3. Prevent family involvement
when the owner wants control to
transfer to business associates
GEARS April 2007
3/12/07 10:55:07 AM
 What constitutes an effective succession While this communication may be used
to promote or market a transaction or an idea
plan depends on your particular that is discussed in the publication, it is intend-
objectives. Every plan begins with ed to provide general information about the
subject matter covered and is provided with
you deciding how you want to the understanding that David Eckerdt is not
rendering legal, accounting, or tax advice. It
transfer your business. is not a marketed opinion and may not be used
to avoid penalties under the Internal Revenue
Clearly, a buy-sell agreement best David Eckerdt is a financial Code. You should consult with appropriate
protects owners and families if arrange- representative of Principal Life counsel or other advisors on all matters per-
ments are made prior to death or dis- Insurance Company and a reg- taining to legal, tax, or accounting obligations
ability. And funding the buy-sell agree- istered representative of Princor and requirements.
ment so the dollars are there when Financial Services Corporation.
needed is essential. There are a myriad
of disability and life insurance solutions
for this problem.
Its never too early to plan for
the continuation of your business. To
get started, ask yourself some general
questions:
Why do you want to plan for
business continuation, and
what do you want to accom-
plish?
When and how do you want to
transfer your business?
Who are possible candidates to
Ready to Shift
own your business? to a Better
What do you consider an
acceptable value for your busi-
Insurance Program?
ness?
What problems could arise in
the continuation process? Get into Gear with
Who is available to help you? Heffernan Insurance Brokers.
First and foremost, assess your
business continuation situation care- Offering property, liability,
fully so your plan accomplishes your workers comp and more for
goals. A buy-sell agreement funded your transmission business.
with life and disability insurance may
offer some answers to keep the dream
alive!
It will take all your financial pro-
Contact us today
fessionals working together to build a Brant Watson
business continuation plan that will help 800.234.6787
accomplish your objectives, is flexible, BrantW@heffgroup.com
properly funded, and cost effective. www.heffgroup.com
Without a succession plan, the effect on License #0564249
your heirs, your estate and your busi-
ness could be devastating. For more
information about business continua-
tion planning, contact your insurance
representative.

ATRA program facilitated by

Heffernan Insurance Brokers and Brant Watson.

GEARS April 2007 35

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