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Any Thoughts on this Subject?

Discussion in 'Business Fundamentals' started by winterangel, Jan 28, 2005.

  1. winterangel

    winterangel Member
    from Ohio
    Messages: 51

    Here is a food for thought that goes through my mind ever so often and yet I have not heard or read a single thread on this subject.

    Granted we are not getting any younger, majority of us has families, what have some of you done for protection of your lively hood when sick and death? Do you have it set up to sell?
    Have it looked over until your child(ren) are old enough to take over like planned?
    Have the spouse run it?

    Any thoughts on this one :confused: :nod:
  2. somm

    somm Senior Member
    Messages: 200

    Its a sorry lot that has no life insurance, or good partners with other local business-owners in the same trade which are invaluable. It pays to talk to more than the trees and shrubs, you sure as hell don't live forever.
    Best Regards
  3. loaderlee

    loaderlee Junior Member
    Messages: 1

    good idea...

    Life insurance and a succession plan are a must for any buisness unless you want it to fade away after you leave this great earth. Life insurance will take care of your family or benificary and assist them in keep your business going if that is your wish. I've seen numerios comes go down after the owner dies beracusr he never told anyone what he wanted or what was going on.

    A good buisness man plans for the future on all levels!
  4. winterangel

    winterangel Member
    from Ohio
    Messages: 51

    Thank You for responding!! :nod:

    I hope my daughter will carry this on as planned. She loves the dirt, mudd, and worms. Mainly the machines as her toys :p
  5. plowman350

    plowman350 Senior Member
    Messages: 125

    My other life

    In my other life, when I'm not plowing snow I work as a financial advisor here in Michigan. The most common version of business succession planning, involves setting up something called an ILIT (eye-let). This stands for "Irrevocable Life Insurance Trust."

    Basically what you do is using your financial advisor and an attorney, you set it up so that the person who is to handle your business after you're gone buys a life insurance policy on you. When you die (assuming you're incorporated) they recieve the death benefit (tax free), and use that money to purchase the shares of stock in your company, thereby making them the new owners. The ILIT has specific legal requirements which state exactly how much insurance will be maintained, who owns it, who pays premiums, who gets the benefit, and how much will be paid to the inheritor of your business.

    This can also be set up as a "cross-sell agreement" between partners. Let's say that 3 people own a business together. Each one of the 3 members buys a life ins. policy on the lives of the other two. That way, when one partner dies, the other two recieve a death benefit that is used to purchase his share of the company from his heirs. Too often businesses fail after a death because this stuff isn't set up.

    IF this isn't set up properly, under common law the spouse becomes the sole owner of her husband's share of the company. If you have a 2 person partnership, that menas your new partner is a surviving spouse. Do you want her having 50% control over your business? Do you want to give her 50% of your net income if she doesn't even work for the company? Do you want to need her approval for every purchase, contract, employee, etc that you aquire? Some surviving spouses could be very business oriented, and be great partners. But, usually the business is driven into the ground and arguments ensue....then the surviving spouse loses an income, and so do you.

    My point is, that a plan nees put into place. Also, its not something you can do without a little bit of help. You need to contact a financial advisor who can assist you in setting up the life insurance correctly, and you NEED an attorney to do the legal paperwork correctly......usually the financial planner will put everyone together for you and oversee the whole process. In my case, I don't charge a fee for this service....I simply get paid commisions by the ins. company with whom I do business.

    If you have questions, or would like information, feel free to contact me, this is what I do for a living! (when its not snowing!).

  6. winterangel

    winterangel Member
    from Ohio
    Messages: 51

    My Problem is...

    My spouse has never been involved in the green industry or the plow business. Mechanically intuned, but far as what I do everyday is new to him. I run this, from business to field work. No one eles is involved, I am building this from scratch for not my health but for one day My daughter can take over once she earns it the old fashion way. If not then I sell it for extra retirement $$.
    If i become sick or worest before she has developed enough majority to run it, then, I can only hope some of the men I know in business as I am would be able to come forward and run or sell it for what it is really worth for her :nod:
  7. plowman350

    plowman350 Senior Member
    Messages: 125

    For goodness sakes' don't hope that it all works out. Set up a legal structure to ensure that it works! The cost of setting up the proper insurance and legal documents is a tax-deductible expense. It's not cheap, but compared to the unpredictable impact it could have on your family, you can't afford not to. What you need to do is sit down with your family/business partners and discuss what you would like to have happen in the event of an illness or untimely death. You need to make sure you have people who can and will handle your business should you be unable to. If you get that commitment from people, set up a legal and financial structure to ensure that it will happen. (using life insurance...see my previous post).
    Insurance for business succession should be just as important as liability, auto, and health insurance. What is the value of your business? I'm sure its much larger than your cars, or even your home. You insure those, so don't hesitate to insure the future continuation (income) of your business.

    "If you can't afford the solution, you can't afford the problem!"
  8. winterangel

    winterangel Member
    from Ohio
    Messages: 51

    You are so Right

    Everything you have said in both post is so true, this is why I have taken the ball in my own hands and have been reserching for what I have been wanting.
    Yes, I can afford the solution, No I don't want to let this become a problem.
    I want no smoldering then become a fire and not be able to put it out.
    I am mainly reserching other avenues that maybe I have not thought of and also, when in black and white from other business owners it is also something to help back up my case and point that something has to be done NOW

    I will be checking out your website here soon, thank you for your harsh reality. :nod:
  9. plowman350

    plowman350 Senior Member
    Messages: 125


    Please feel free to e-mail me or send me a PM, I'd be happy to help in any way I can.
  10. hickslawns

    hickslawns Senior Member
    Messages: 613

    Don't forget about disability insurance. We have life insurance on myself and wife, and disability on both, but that is not always enough. Disability is only good for the term you pay for (I think 2 years of benefit is standard according to my financial guy). If I was out of commission for 2 years or more, the coverage I carry is enough to pay extra employees to do the work I normally do myself. This way the income is still coming in and we don't have extra payroll to cover on top of the regular budgeted bills. Maybe that isn't the normal way to do it, but that is how we will do it if the need arises.
    I don't want to rain on your parade, but in this part of the country it doesn't seem there are always businesses willing to buy a lawn/landscaping company. Many are vultures awaiting your impending failure should you become disabled or dead. I have watched several business owners go through ugly "buy outs". Usually they sell the equipment and basically subcontract the accounts for 2-3 years at which time they are the new owners accounts for good. I have yet to see anyone do well with this approach. Usually it goes like this: Older business owner wants to retire. Young guy or new guy "buys" him out. Equipment is sold off to new owner or whoever wants it. New owner doesn't keep up with the accounts as he has no experience or little. They usually begin losing accounts rapidly and neither party has money coming in. Worst case scenario is they just can't handle it, and back out. Old business owner has nothing to recover from new business owner. He also has to go through painful legal process to attempt to recover what he "sold" to the new guy. Now the old business owner has nothing to show for years of his business development. By the time he finds another owner to sell to, there is so little to offer he ends up taking any offer thrown at him.
    What I am saying is this: keep your overhead low and borrow as little as possible. I started in my early 20's with good credit and borrowed with the young naive entrepreneurial spirit many young guys do. I am still recovering from this, but I did learn. Now we budget much better, and buy with cash whenever possible. Slow, steady, controlled growth is the way to go. This way you know what is coming at you and you can develop a strong business from the ground up. Our 3 year old daughter loves working with Daddy, and I pray our 8 month old son is the same. this does not mean at ages 14 or 16 they will feel the same. Besides, my wife wants to send them to college and I can't say I disagree. By allowing my kids to work with me (within reason not always very professional to have your kids out there unless they are older and blend in with the other employees) this teaches them work ethic, responsibility, and how to do honest business. I hope my kids learn the importance of business ethic, integrity, and hard work. Even if they choose not to follow my footsteps, this will give them important attributes which will allow them to be successful in whatever path they follow.
    With all this said, I guess I could sum it up with "Don't count on anybody but yourself". Cynical? Maybe. Realistic? Most probably. Invest for your future. Keep your debts low. Keep your profits high. Keep your eyes open for opportunity at all times. Don't forget to pay your taxes. Don't turn your credit rating to mud. Those are some of my philosophies and you can take out of them what you want. Good luck with your business, and may you prosper and hopefully never have to worry about getting sick or needing to use that life insurance for a long time!