BUSINESS CONTINUITY & PLANNING

Key Person Insurance

Business Overhead

Buy/Sell Agreement

Executive Disability

There comes a time when almost every small business owner contemplates the future of his or her business. Because “the business”  typically is a substantial asset, an owner must address a number of estate planning issues that will affect the future stability of the company. A business succession plan is a comprehensive look at the estate planning picture that can include everything from  shareholder buy-sell agreements to management plans and any other documentation that will help ensure the smooth operation of the business.

While traditional estate plans are designed with tax minimization in mind, business succession planning, in addition to such considerations, is aimed at maintaining the future health of the business.

There is a need to protect family members and executors from the devastating effect of a business owner’s death. If the business is either a proprietorship or partnership, it must cease operation upon the death of an owner or partner. Although a partnership agreement generally will provide for the continuation of the partnership by the surviving owners, it is also important that some provision be made for the acquisition of the deceased in the same interest. A sole proprietorship cannot be continued in the same manner as can a partnership. If proprietor assets are not specifically bequeathed to, say, a child who has been identified as the successor to the decent, they will pass under the general provisions of the will. During the probate process, the executor would be responsible for operating the business, which could result in business losses and lost value. To address this and other potential problems, a business succession plan is critical.

Key Person Insurance

Key Person Insurance is life insurance for the life of the key employee, owners, or other valuable person whose lost knowledge or services would create a financial hardship for the business.

Business Overhead

Business Overhead Insurance pays the insured’s business “overhead” expenses if she or he becomes disabled. The policy is designed to pay a monthly benefit based on actual expenses, not anticipated profits.

It is designed for businesses that rely on a small number of people to produce revenue.

The following business overhead expenses are usually included:

- Rent

- Utilities

- Interest payments on business debt

- Employee salaries and payroll expenses

- Postage and stationary

- Accounting fees

- Other tax deductible business expenses.

Buy/Sell Agreement

A Buy-Sell Agreement is an agreement between co-owners of a business that details what is to occur upon the death or disability of  the owners.

The Buy-Sell Agreement usually is set up so that the surviving owner(s) of the business will purchase the decreased or withdrawing owner’s percentage. These agreements are often funded with life and/or disability insurance.

Executive Disability

Disability insurance is one of the most important parts of a secure financial plan, especially for highly compensated executives.

The plan allows white collar executives the ability to maintain their standard of living in the event an injury or illness leaves them unable to work.