Broker Check
AIP Financial Services

Enhancing Retirement for Michigan Families Since 1993

(866) 247-6663 • (248) 312-2652

2041 E. Square Lake Road, Suite 200
Troy, MI 48085


Business Exit & Succession Planning

Business succession planning is very important and has many facets. Some of the critical planning areas include: key person, buy/sell agreements, and an exit plan for when you’re ready to retire. Many businesses have multiple owners, which adds complexity and requires more planning. Many business owners do not adequately plan for succession, leaving their business (and their family) at risk from unforeseen events such as a sudden illness, accident, or the premature death of an owner.

For businesses with multiple partners, the issues are even more complex. If no plan is in place when a partner dies, the remaining owner could suddenly find himself or herself in business with the partner’s family, who may expect continued income from the business without being able to contribute anything to the business. A buy-sell agreement would allow you to purchase your partner’s interest from the family, allowing the business to continue while protecting the family from financial risk. While many business owners feel that they have covered their bases with an incorporation or partnership agreement, our experience has shown that these agreements often do not cover these situations. We strongly urge you to check with your legal advisor to be sure that buy-sell contingencies are covered in your original legal documents.

The best time to work out an agreement with a partner is when all stakeholders can sit down and discuss it. The worse time is when a partner is incapacitated or gone and you are dealing with his or her family with no prior agreement in place. Even having an agreement is not enough when no procedures for valuing the business and completing the sale are in place. Without the money needed to purchase the business, a sale can drag on for months or years, tying up assets and taking attention away from running the business. On the other side of the table, the partner’s family might need money from the sale to cover debts and ensure financial stability after a breadwinner’s death. Life insurance on both partners can fund the buy-sell agreement, eliminating the need for outside assets. This is also an excellent time to add key person life insurance; the loss of a key employee can be very detrimental to a business and some extra cash can make the difference between a surviving the loss of a partner and failure.

While these are nightmare scenarios, they represent real risks to your business. Business succession planning can help you prepare for the unknown and plan for these contingencies. Our business succession experts can help you evaluate your existing documents and guide you through the planning process or update an existing plan to ensure it meets your current needs.