Choosing a successor is not an easy task, however following the steps below will make the task more organized.
1. Choose your successor
The successor should be someone who has the right skills and ability to lead your company once you decide to leave. If you can’t do this on your own, seek the advice of your board of directors, if you have one. If not, get the help of a lawyer, accountant, and business succession plan consultant to help you make the choice. Making the decision should not be based on emotional factors but on objectivity. The plan should not be completed within months of your decision to retire, but ten to fifteen years before.
Life insurance
Life insurance for owners who have business partners could be dangerous to ongoing operations and allow estate plans to be needed and used. The death of a business partner could result in considerable losses for a company and could lead to a company’s insolvency. One of the most important things homeowners need to determine before starting an estate plan is their life insurance policy. Life insurance may be held by a third party or by the company on the life of the owner, as long as the third party has an “insurable interest” in the life of the insured. An important document that all homeowners must execute is a purchase-sale agreement financed by life insurance. In this case, when a partner dies, the life insurance benefits are paid to the company for the execution of the operations. Another beneficiary may be chosen, but there must be assurance that the funds will be used to help run the business. There must also be an agreement to sell shares, either as part of the sale or as a separate agreement. This will describe how the deceased partner’s shares will be distributed to the other partners or purchased by the company.
business interruption insurance
A second type of insurance that should be purchased is Business Interruption Insurance, which protects the business in the event of interruption of normal business operations. Business interruption coverage is added to a property insurance policy or included in a package policy.
Second stage
When writing the second step of the plan, the financial needs of the owner and their spouse and family must be considered. Many experts hold that a retired person can live on about 80 percent of his or her job salary; however, that number is often unrealistic. This is due to the fact that financial needs will many times exceed 100 percent of your previous income due to the possibility of travel, gifts to family, extra money spent on grandchildren, all can take the predecessor beyond your income. previous.
