Family and other closely held businesses constitute the backbone of our economy. A major challenge to the survival of a closely held business is the retirement, disability or death of its founders or other key people.
The basic document that closely held business should have in place is a buy-sell agreement. A buy-sell agreement anticipates passing the business on to other family members, or to others who are key to the continuing success of the business.
A buy-sell agreement describes events that give rise to options or requirements for the sale or acquisition of an owner's interests in the business. The events include among others: divorce; disability; death; termination of active employment; irreconcilable differences among the owners.
In the family business context, emotions can run high among siblings and between generations. A situation may arise where family members who are active in the business are not equally valuable to the business's continued success. Difficult as these issues are to face, a time may come when making hard choices can't be avoided.
Business succession planning is best viewed as a process. Consider including in the process family members who will be affected by the business succession planning and thus by the provisions of a buy-sell agreement. Also, keep in mind that a change in circumstances may render present wills and buy-sell agreements out of date.