Business Continuity

Fortune Management Group understands the three risks facing the business owner: death, disability, and retirement. Likewise, upon the business owner's death, disability, or retirement, only one of three things is going to happen to this business; it will be continued, sold, or liquidated. The planning process should reveal the answers to these questions:

Will SUCCESSOR MANAGEMENT be available and willing to operate the business? Such a person could be either a family member or a key employee, but it is important to be realistic about both their abilities and their commitment to staying with the business. A yes answer will lead to...
Would a SATISFACTORY RETURN on business capital be provided for the family? The decision as to what is "satisfactory" is a highly subjective determination, but it usually falls within the range of 6 to 20 percent. A yes answer will lead to...
Could TAX-FAVORED PROFITS be withdrawn for the family? If the business is a corporation, then payment of a salary to the stockholder-employee is "tax-favored" as a deductible business expense. However, the same payments to a surviving spouse might be characterized as non-deductible dividends.
Is there a strong desire for CONTINUING FAMILY INVOLVEMENT in the business? A yes answer to this question is often the result of a strong sense of family pride in the business, despite one or more "no" answers to the previous questions. Under such circumstances the business might well be continued, provided that steps are now taken to assure that continuation is possible. A no answer to this question will lead to...
Would a BUYER be readily available? If the answer is yes then the business should be sold with a binding agreement and adequate funding in order to assure that the sale takes place. A no answer to this question means that the business is likely to be liquidated and its assets sold for a fraction of the value.

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