For the next few paragraphs, let's assume you own the business -- lock, stock and barrel, the whole kit and caboodle. That makes you eligible to answer a question not that many advisers ask, a question even fewer business owners can answer: Who's your Right Who?
The answer has nothing to do with Dr. Seuss. Instead, according to Aaron Ruswick, identifying the Right Who can greatly impact the value of your business -- particularly when you reach, or near, the end of the road.
Ruswick is a partner at the Wheaton law firm of Huck Bouma PC, where his specialties include smaller businesses and estate planning.
Business owners don't often think about estate planning. Ruswick thinks we should, however, especially because adding business ownership to the estate mix inevitably adds issues to the list of topics business owners should consider.
"The issues collide when we get to the value of the company," Ruswick says. "If the business owner dies, or becomes disabled, and doesn't have the right people in place; if the right contracts aren't in place, customers can leave. Employees can take customers and set up shop next door."
And the surviving spouse -- in our example your choice to inherit the business and its value -- has a problem.
Enter, hopefully, the Right Who. According to Ruswick, the Right Who is the individual who will take over management of the company when you no longer can lead the way. The Right Who could be a key employee; one of your kids, preferably one already working in and conversant with the business; one of your siblings; your spouse.
Ruswick's concept is that the pre-identified Right Who, aware and in place, will be able to open the door tomorrow and keep the business running smoothly. Perhaps ideally, your Right Who will buy the business from you, or your estate, with dollars very likely from an existing insurance-funded buy-sell agreement that you have put in place.
On paper, it's all pretty simple. You've built considerable value into the company since start up, and your planning has included the right people and financial devices that will allow the business to continue and (through the buy-sell agreement) spin off dollars to your heirs.
The transition requires planning, however, and Ruswick knows there are a few plans too many business owners fail to have ready:
• Most business owners don't find the Right Who. Many, in fact, never think to look.
• The proper restrictive agreements -- papers intended to keep employees from walking customers away -- aren't in place.
• Who might buy your company in the event of your death or disability? The buyer, for example, could be a competitor willing to make a strategic purchase.
Ruswick tends to move the process along. In his planning sessions, "The (business owner) is dead within the first five minutes," he says. Decisions tend to follow quickly.
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