If you are like a lot of small business partners your share in the business may be one of your single most significant financial assets. So of course the value of the business share is going to make up a large portion of your estate. Because of the fact that you are probably going to want to spread this value among multiple different people selling the share in the business would probably be necessary.
Should your family members sell the share to the highest bidder your remaining partners would have no choice but to work with the buyer whether they liked it or not. This is not going to be very agreeable to your partners, and of course you wouldn’t want to be in that situation either. The solution to this challenge is often found via the execution of buy-sell agreements.
One such agreement is called the cross purchase plan. The partners in the business get together to determine how valuable each share is. They then take out life insurance policies on one another. The point is for the combination of the policies to equal the agreed-upon value of a business share. When one of the partners passes away, the others collect the insurance policy proceeds. These funds are used to purchase the share that was owned by the deceased partner from his or her heirs.
There are particular challenges involved in small business succession planning. The best way to address them is with the assistance of a licensed Somerset County estate planning lawyer who has a background assisting members of the business community.