Business Succession Planning

Business Succession Planning: Don’t Be Caught Unprepared

Most small business owners spend the vast majority of their time focusing on the day to day management needs of their company in order to be successful.  Unfortunately, these obligations often preclude these same business owners from planning for their company’s future successes and the eventual transition of ownership.  Let Stock Yards Bank & Trust Company help you design a business succession plan to ensure today’s successes continue on tomorrow.

Vital Questions for Success:

  1. Do you know the true market value of your business?
  2. What do you want to happen to your business if you become incapacitated, pass away, or on a more positive note, retire?
  3. Do you want your business to remain in your family? Have you chosen the family member(s) and are they interested in taking on this responsibility?
  4. Do you want your company to be purchased by a partner or key employee? If so, does the buyer have the funds necessary for the  purchase?
  5. Is your plan in writing and do you have appropriate legal documents in place?

Business Valuation

An important step in succession planning is securing an accurate value of your business.  Most likely, the small business is your largest asset so it is important to know its value.  There are many business valuation firms capable of performing formal valuations, but the associated costs can vary widely, ranging from $3,000 to $40,000.  Depending on your situation, a formal valuation may not be necessary.

SYBT’s Wealth Management Group can perform a free basic valuation for your business by working with our valued partners.  The importance of this service cannot be overstated, especially since there can be significant discrepancies between the book value of a business, a figure used for accounting purposes, and its actual market value.  Therefore, having an accurate valuation can be invaluable during negotiations for the sale of your business or in accurately transferring an ownership interest to other family members or partners. It is wise to have your valuation reviewed at least every two years as values often change with market conditions,

Planning for the Unexpected – Two Important Documents

Power of Attorney

If a small business owner experiences an accident or a medical complication and is left in an incapacitated state, there will need to be someone chosen to act and make decisions on his/her behalf.  Unless the individual has a Power of Attorney, then a court appointed guardian will be selected before any decisions are made or accounts are accessed.  A guardianship proceeding in Kentucky involves a jury trial, and unless an emergency guardian is appointed (which is extremely difficult to achieve), the process can take up to three months to complete.

Last Will and Testament

Most people are unaware that should a Kentucky resident die without a Last Will and Testament and leave a surviving spouse and children, that the estate will be divided – half to the surviving spouse and half to the surviving children – an outcome that is rarely, if ever, desired.  Therefore, it is vital that Kentucky residents execute a Last Will and Testament and consider using a revocable trust in order to control how assets are distributed and received upon death.  A business owner must know who will own his or her business upon death and should feel confident the owner(s) are capable of taking on this responsibility.

Establishing and Funding a Buy-Sell agreement

While there are many types of buy-sell agreements, the common purpose behind them is to enable business owners to establish a plan for the smooth transition of ownership, generally occurring at one’s death or upon retirement.  In order for a buy-sell agreement to be enforceable, however, there must be adequate funding to complete the purchase or transfer called for in the agreement.  The most common method for ensuring that the necessary funds are available is with life insurance.

SYBT’s Wealth Management Group can assist you with selecting the appropriate insurance policy to guarantee your goals are satisfied.  This is true regardless of whether the insurance proceeds will allow for an efficient sale to a partner, key employee or family member, or permit a spouse or family member(s) to exit the business without complication.  If you currently have a buy-sell agreement in place, it is recommended that it be reviewed for possible updates at least every two years. SYBT’s Wealth Management Group can help ensure your best laid plans don’t go awry.

While most within the wealth management industry are running away from complicated financial planning, SYBT recognizes the importance of being a leader within every aspect of the wealth management industry.  We would appreciate the opportunity to tell you more about our investment, next generation, special needs, business succession and financial planning services.  Leverage our expertise in wealth management so that you can focus on your business, your passions and your success!


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