|Buy-Sell Planning Questionnaire|
Following are some questions for you to
consider concerning what you would like to eventually happen to
your business. While not every question will apply to every
business owner, this list should provide you with a general
framework. Your answers will help to determine if a buy-sell
agreement will help in achieving your goals for your business
and your family.
The questions in Part I apply to your
business interest, and what you want to happen when you die.
The questions in Part II apply if you have co-owners in your
business, and one of them dies. Part III concerns disability
and the continuation of your business.
Part 1--You and your business
What would happen to your business if
you were to die today?
What do you want to happen to your
business when you die?
What will happen to your salary?
When you die, your salary can't continue to your spouse or
children unless they can perform substantial services to
Will the company pay dividends to your
Dividends are not deductible to the corporation. For this
reason, surviving owners will resist paying dividends to
your family. It is in the best interest of the surviving
owners as well as the business to minimize liquidation
costs at the death of an owner.
Will your co-owners look after your
family? Do you want them to?
There is a natural conflict of interest between your heirs
and the business and its surviving owners. Your heirs may
want income from the business, but the surviving owners may
want to keep profits in the business for growth.
Do you have family members who are
presently involved in your business?
Could they assume control of the
business if you died today?
Would you want them to?
Would there be resistance from
Do you have an estate plan?
Does it cover your business?
Will your family receive a fair price
for your share of the business?
There is generally no market for a closely held business.
It is unlikely that your heirs will be able to sell your
share of the business for a fair price.
What will the government want?
The IRS may attempt to assess an unrealistically high
value to your stock. This could lead to a costly and
Will there be enough cash to settle your
A high estate tax on unmarketable stock could cause a
severe need for cash in your estate. Federal estate taxes
are generally due nine months after death, and in some
states, state taxes may be due even sooner. Your family
could find itself in the position of trying to raise cash
to pay your estate taxes.
Part II--You and your
What if your co-owner dies?
Do you want to accept new partners?
Your co-owner's heirs could become your partners, even if
they have nothing to contribute to the business.
What if the heirs' opinions differ from
An attempt to freeze heirs out of corporate dividends
would likely lead to a dispute or even legal action. If you
accept a co-owners' heirs into the business, you might find
yourself stuck with partners who know nothing about your
business, and may have some very different ideas about how
to run it.
Where do you want the profits to go?
The heirs of your co-owner will want income. You will want
to put profits back into the business.
Part III--You, disability and
your business interest
What would happen to your business if
you became disabled?
There is a higher statistical chance of an owner becoming
disabled than dying for any given year. Disability has been
called the living death. While disability can leave you
unable to perform your job, your living expenses
What would happen to your salary?
Will your business be able to afford to
continue your salary and hire a replacement for your
Including a disability trigger in a buy-sell agreement can
provide advance planning and funding in the event of a
Do you presently have disability
When was the last time it was reviewed?
If you are presently covered by a disability policy, is
the coverage keeping pace with salary increases?
A carefully drafted buy-sell agreement can
help prevent the situations above. It can provide liquidity
for your estate at your death, by providing a guaranteed
buyer for your business interest. It can provide an income
continuation and/or buy-out plan in the event of