Working Through a Co-Owner’s Death
The death of a co-owner is a tragedy for many reasons. Co-owners are often close friends or family, and heir loss, if you are not prepared, affects the surviving owner’s family, employees, and the business’ future.
In the face of a co-owner’s sudden death, how can you quickly prepare the company for a sale? Here are a few steps you can take.
1. Keep financial security in mind.
Before you take any actions to sell after a co-owner’s death, determine whether a company sale is in the best interests of your financial security.
It’s crucial to remember that the most important aspect of planning for a successful future is achieving financial security. If at all possible, take steps that allow you to continue to pursue that goal. In other words, don’t sell your business short.
If you aren’t sure what it would take to achieve financial security under these circumstances, work with a trusted financial advisor—who can bring both expertise and level-headedness to the situation—to help guide you through the decision-making process. It’s too easy to make snap, emotional decisions in the face of a major loss.
2. Turn to your Business Continuity Plan.
In a co-owned business, a strong strategy to address a co-owner’s sudden death is to turn to your written Business Continuity Plan (BCP).
A BCP is designed to guide your advisor team, family, and surviving co-owners toward what they should do to protect the business and the decedent’s interests. These plans also can provide a path to sell the business for as much money as possible as soon as possible, which is a common strategy that surviving owners choose to consider.
The BCP is different from a Buy-Sell Agreement. While a Buy-Sell Agreement may provide a strategy for transferring ownership upon a co-owner’s death, it may not provide guidance about how to keep the business functioning. This can have widespread effects on how, or even whether, the surviving owner can sell the business and achieve financial security.
3. Lean on your next-level management team.
Your next-level management team strengthens your business in the likely event that you and your co-owner(s) live long and prosperous lives. And the team can be the catalyst that enables a quick, efficient sale, if the unexpected happens, because they are already capable of running the business in the absence of the current owner.
What if I don’t have these plans in place?
Without these plans in place, it can be more difficult to make decisions with speed and objectivity, and to prepare the business for a quick sale that allows you to achieve financial security.
Our advisors at LAN strive to help business owners identify and prioritize their objectives concerning their businesses, employees, and families. If you are ready to talk about your goals for the future and get insights into how to achieve those goals, we’d be happy to sit down and talk with you.