Succession planning can seem like an overwhelming process, especially when you're in the early stages of considering the transition.  The following list of questions is designed to help you organize your thoughts as you determine the proper strategy for transitioning your business.

Personal Goals

• What are your goals for retirement and how much money will you need on an annual basis to achieve these goals?
• Besides your retirement savings, what sources of income will you have in retirement (e.g. rents, social security, pension, etc.)?  Will these sources be sufficient to meet your retirement goals?
• If not, how much additional retirement savings will you need to ensure that you can meet your goals?  -Do you already have a sufficient nest egg or, if not, how far short are you?
• Are you comfortable spending a portion of the principal of your retirement savings each year or do you desire to simply let earnings on those savings make up the shortfall?
• When do you want the succession planning process to begin?  When should it be completed?

Business Goals

-Do you know how much your business is worth?  Do you have an independent estimate of value?  When was it completed?

-How important is it to you that, after your retirement, your business remains an independent entity?  Is that an emotional or perceived financial issue?  Do you want your business to remain in your family?

-If your deisre is for the business to remain independent:

     -Who are your successors (managers and owners)?

     -What roles will they play?

     -What training will be required?

     -Will you remain involved?  In what capacity?  For how long?

Estate Planning

-Is your estate plan updated (i.e. living trust, powers of attorney, etc.)? Does it ensure your that your estate will avoid probate?

-If there are other owners in your business, do you have a buy-sell agreement?  When was it last reviewed?

-If you have a family owned business, are there family members who are not active in the business?  If so, will they inherit an equitable share of assets?

Tax Considerations

-How will the transfer of the business affect your taxes? The business' taxes? The successors' taxes?

-Will you run into estate tax issues upon your death?  If so, have you figured out how to pay for those, or how to avoid them?

Method of Transfer

-If you're planning to sell the business to a third party, will you sell the actual stock or the assets of the business?  How will the buyer finance the purchase?

-If you're planning to retain the business, can you take advantage of gifts?  Bequest?  Discounted sales?  Options?  Combination of choices?

You don't have to have all the answers before you start putting your plan in place, but the more you consider these issues, the easier the process will be.  Ultimately, a proper succession plan will: 1) leave you in control for as long as you wish, 2) set expectations for all involved, and 3) avoid unnecessary taxes on the transfer.

As a business owner, have you ever worried about what would happen to your business if one of your partners became disabled, got divorced or died? If you had a Buy-Sell Agreement in place, you could sleep a little easier.

Simply put, a Buy-Sell Agreement is a contract that dictates how, when and for how much a company or its remaining owners will be required to pay to acquire the interests of a departing owner. This kind of agreement is essential if your business has two or more owners, but it makes sense for any kind of business entity, from LLCs to corporations and everything in between. In addition to the peace of mind it provides, business owners with a Buy-Sell Agreement in place can avoid costly court battles, or worse, total business failure.

An effective Buy-Sell Agreement should address how the funds needed to buy out an owner will be provided. This funding needs to align with the triggering events. Often, insurance is maintained to fund purchases in the event of death or disability. Other situations are often covered by structuring a purchase over 5 to 10 years.

There are different types of triggering events that Buy-Sell Agreements address. For example, if an owner dies, the surviving business owners may inherit heirs for business partners who care little whether the business survives. The death of a spouse, disability, bankruptcy, termination of employment and retirement are other types of triggering events that put a business at risk.

There are also three forms of such an agreement. They include Cross-Purchase, Entity-Purchase and a hybrid of the two. An experienced business attorney can help you determine the appropriate type for your situation. To have an effective Agreement, the owners must agree upon a mechanism to set the future value of the business. Possibilities include: book value, multiple of earnings, appraisal and annual valuation by owners. Again, these are things you should discuss with your attorney.

Your business needs protection from the unknown and ensuring that critical events are properly covered is essential to the long-term survival of your business. A Buy-Sell Agreement can provide just that.

It is an essential requirement to the long-term survival of your business.