Should I Sell My Business to an Employee or Heir?

A Video FAQ with Ronald K. Parsonage.

That is certainly a difficult question because you probably have an emotional attachment to these people and would like to sell it, but you, first of all, have to establish whether or not they are capable of running the business. The second most important aspect, if you care about the business and the people, is making sure that the staff that is there will continue in your absence. Frequently when you sell to an employee or to an heir you find out that you can’t, perhaps, charge the full amount for the business that you think it would bring from others. There are ways to do it with employees through ESOPs and through redemption agreements that can ease the pain of the cost of taking over the business.

© 2014 Parsonage Vandenack Williams LLC

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What Should Be Included in My Business Exit Strategy?

A Video FAQ with Mary E. Vandenack.

The first thing you should consider in your exit strategy is the timeframe: when are you wanting to exit the business? The more time that you have to plan that exit, the more opportunities you are going to have to create. The next things you want to consider are who your potential buyers are and what type of value your business has. Each industry has a way of evaluating the business and you need to know what your industry evaluation strategy is so that you can maximize your business during the time before you exit so that when you do exit, you are able to get the best dollars for your efforts over the years.

© 2014 Parsonage Vandenack Williams LLC

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I’m Ready to Retire, How Do I Get Value Out of My Business?

A Video FAQ with Mary E. Vandenack.

What you want to consider when you are getting ready to retire, with respect to your business, is who your potential buyers are. Getting the right buyer is going to get you the most value out of your business, so consider whether you are looking for a third-party buyer, whether you have a child in the business who might take over, whether there are employees who might take on the business, or whether your business is one of the types that you simply maximize the income for as long as you can and then throw the keys out when you are done.

© 2014 Parsonage Vandenack Williams LLC

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How Do I Keep My Business Going in the Event of the Loss of a Partner?

A Video FAQ with Mark A. Williams.

It is usually important if you have partners in a business to have some type of buy-sell agreement. Partners should agree on what happens if one of them passes away, becomes disabled, or simply doesn’t want to work anymore. Usually you can fund these types of situations through insurance or through the company saving up so that if a partner does want to walk away from the business the other partner can purchase the interest and keep the business going. There are a lot of other ways to do it, but sometimes for simplicity it’s best to think about when two people come together for a partnership, you need to decide what is going to happen when they don’t want to work together anymore.

© 2014 Parsonage Vandenack Williams LLC

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How Do I Protect My Business in the Event of Death or Disability?

A Video FAQ with Mark A. Williams.

It is important for every business to have a succession plan, and that can be having key employees who are ready to step up if something happens to you. It can also be having family and generational aspects of people that can take over your business if something happens. From a financial side, this where insurance can come in to play. There is insurance you can purchase to protect against your disability and insurance to make sure there are funds there for your family if you pass away, so you really have to look at succession planning from both parts: who is going to take over and run the business and ,financially, will my family be able to survive once I’m gone.

© 2014 Parsonage Vandenack Williams LLC

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What Are the Risks to My Business in the Event of a Divorce?

A Video FAQ with Joshua A. Diveley.

The risk to your business in the event of a divorce will depend on what state laws apply and what those laws say. For example, in Nebraska, Nebraska is an equitable distribution state, meaning that the assets acquired during marriage will be equitably distributed among the 2 individuals. If you did not have a prenuptial agreement when you came into the marriage and you acquired that property, it is subject to being split up just like any other asset. In addition, the internal agreements between you and other owners may say that upon the event of divorce, the other parties may have an option to buy you out to help keep the business out of being involved in that divorce, so another consideration is what the internal documents say among the owners.

© 2014 Parsonage Vandenack Williams LLC

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What Is the Best Way to Resolve Disputes Between Business Partners?

A Video FAQ with Ronald K. Parsonage.

As a practical matter, what you would like to see clients do is establish ahead of time what the responsibilities of each partner are so that they can act appropriately and understand what their responsibilities are with their other partners. In that manner, they can establish whether there need to be adjustments in compensation or other matters can be handled. As a practical matter, they don’t do that; therefore, what we really would hope is to have a clear exit strategy that they could follow by reason of having a buy-sell agreement that would be fair to everyone.

© 2014 Parsonage Vandenack Williams LLC

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Can I Change My Business Organization From One Type to Another?

A Video FAQ with Mary E. Vandenack.

There are 2 things you consider changing when you are going to change a business organization. The first is its legal form, for example, changing from a partnership format to a limited liability company. Those issues are covered by the law of the state. So if you have an entity that is a Nebraska partnership, you are going to look to Nebraska law in how to change the format of that entity. The second issue is a tax issue. There is a different type of tax treatment for each type of entity. Changing the tax status of an entity from one type to another type of corporation can be a little trickier and should be given a lot of consideration.

© 2014 Parsonage Vandenack Williams LLC

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What Are Buy-Sell Agreements?

A Video FAQ with Mary E. Vandenack.

Buy-sell agreements are agreements between owners of a business governing the relationship. Typically, they will govern what happens when one of the business owners wants to leave. A buy-sell agreement will cover different types of situations as well. If the owners also work for the business, it will cover what happens when one of the owners decides to discontinue working for the business. Another issue that will be covered is what happens if one of the owners becomes disabled or if one dies while owning the business. An important aspect of the buy-sell agreement is determining the value—so how much is going to be paid out to a business owner that dies or becomes disabled. Another issue is the terms of a buy-out. Is it going to be an issue for the business to figure out how to fund a sudden payment to an owner of the business. Often strategies like life insurance or disability funding for a buy-out are used to assist with that.

© 2014 Parsonage Vandenack Williams LLC

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