Information Needed and to Consider for Succession Planning
As a business owner, you have put your blood, sweat, and tears into the growth of your business. You might want to keep the business in your family, sell it to a key employee, or maybe sell it to a third party before or after you pass away. Are you concerned what will happen to your business if you become incapacitated and are unable to run the business? Is your family depending on the income from the business? It is important that you plan ahead so that your business does not fall apart if you can't continue to run it or if you pass away and the business ends up in probate court. It is also important to understand that there are tax consequences at different stages of your estate plan which will affect your business. Do you have a buy-sell agreement? operating agreement? life insurance for key employees?
Below is some of the information needed by an attorney to assist you in making a proper succession plan for your business:
1. What type of business? Name, address, number of owners
2. Date and State Organized under?
3. Who are the owners/shareholders? Name, address, phone number, percentage of ownership, name of spouses (any marital property agreements)
4. What agreements or corporate documents already exist?
5. Who are the officers/directors? Name, address, phone number
6. Are owners employed by corporation? Who, what position and salary
7. What is the fair market of shares? Any appraisals done on value?
8. Condition for a buy/sell agreement?
d. sell to 3rd party
9. Type of Plan?
a. remaining shareholders purchase (cross-purchase)
b. corporation (entity purchase)
11. How will the shares being purchased? When will values be reviewed?
a. Life insurance
b. Corporate Surplus
c. Corporate Reserve
d. Distribution of Corporate Assets
e. Personal Assets
12. Use of Life Insurance
a. Name and address of corporation
b. Use existing policies:
i. policy numbers
ii. type and amount of policies
iii. current owner of policies
iv. name of current beneficiaries
v. amount of premiums
vi. premium payment terms
viii. what if policy lapse
13. Trustee Administration – name and address
14. Documents Needed:
a. Articles of Incorporation
c. Organizational Agreements
d. Commissioner of Corporation/ State/IRS
e. Financial Statements 5 years
f. Appraisals or other documents stating worth
g. Insurance policies used for funding
15. Buyout Price
a. Fixed Price
b. Book Value (assets – liability for last year)
c. Multiple of book value (include intangible – patents, copyrights, brand names, trade names)
d. Capitalization of earning (look at past value)
This page is for informational and educational purposes. They are not meant to recommend any estate plan, investment plan, or tax plan. This information is general in nature and not specific to anyone's individual needs. Please always seek qualified attorneys, financial advisors, and accounts to determine your individual plans.