Succession Planning for the Business Owner
with Patrick D. Coen, Partner
Patrick Coen PC: My name is Pat Coen, I am a partner here at Zanck, Coen, Wright & Saladin. I’ve been with the firm since 1976 which officially makes me a dinosaur.
My area of expertise is business planning and that entails everything from acquisition to disposition of property. What we are talking about today is succession planning for the business owner.
Hopefully in the life of a business owner, it has grown to be a success and the problem that that business owner then has is how do I pass that asset on to those I want it to go to? And they are peculiar problems in business succession because the businessman is faced with the inevitable – when I am gone what do I want to have happen to my business? And oftentimes he has some conflicts in that he wants to take care of his spouse and his children but oftentimes that spouse and/or children are not intimately involved in the business.
And there is a difference because if he favors the spouse and children when they know nothing of the business, that may cause the business to suffer and likewise most of the time that business asset is the major asset of his estate and certainly he wants that business to thrive and he doesn’t want to have that spouse or children deprived of that major asset. And therein lies the rub when you are looking at succession planning.
Succession planning takes various aspects but most often you have to begin your planning well before the event that everyone is concerned about i.e. their retirement or the death or disability of the primary owner. And oftentimes the major concern is finding who that successor owner is going to be whether it’s going to be employees, whether it’s going to be a key partner, an individual. Whether it’s going to be some of the children that may in fact be working for the business as opposed to some of the children that may not be working for the business.
Generally speaking, business succession planning requires a careful evaluation of life insurance because life insurance products oftentimes are used as the funding vehicle to allow cash to be dispersed to the family whether it’s to the spouse or to the children while keeping the business as an ongoing entity and keeping the management team intact because oftentimes the business owner does not want an uneducated spouse or child to be involved with the business because that could lead to a disaster for both. So if there is a way to monetize the value of the business, give that value to your loved ones while still allowing the business to continue on, that’s a win-win situation.