What if Humpty Dumpty Didn’t Fall Off the Wall?

Jun 20, 2019

Remember the story of Humpty Dumpty … he sat on a wall … he had a great fall … and all the King’s horses and all the King’s men could not put Humpty Dumpty back together again.

Do you have anything in common with Humpty Dumpty? If you are like most successful business people, I would say it is highly likely. Most of us are so busy with developing and growing our business that we become very much like Humpty Dumpty. Becoming so preoccupied with the day-to-day demands of our business, and as a result failing to spend time planning for the preservation and distribution of our business interest.

Let’s try a quick exercise…

Step out of your position as president or partner for a moment and imagine you are a bystander watching a once profitable business being auctioned off. The business is being dissolved. Surviving family members receive liquidation value – no goodwill dollars. The business must be sold at a loss due to the death of the owner. Ask yourself, could this be your business?

As a business owner or partner, your wall may be built out of many bricks. Whether it’s passing to family, business partners or a combination of both, you may be sitting on a wall of denial; a wall of procrastination or a wall of naivete’ with regard to the problems you, your family, partners and employees will face should you die, become permanently disabled or retire. And, your business isn’t the only one at risk of a great fall, as only 30% of family owned businesses survive to the second generation of leadership.

If you had the choice of receiving the full market value of your business interest in the event of your death, permanent disability, retirement, etc. OR the fire-sale value of business assets, which would you choose?

You are one legal document, a few insurance premium dollars and about one hour of your time away from guaranteeing full market value for your business interest. The “Business Will” more commonly referred to as a Buy/Sell Agreement or Shareholders’ Agreement is a document that can bring you safely down from your wall’s edge.

The Business Will (Buy/Sell Agreement) is a contract between owners, partners or principals in a business. It provides numerous advantages to the estate of a deceased business owner and to his surviving partner or co-shareholder, including: continuity of management; needed liquidity by converting unmarketable stock to cash; a fair and reasonable price for the business; and a method of pegging the value of a decedents interest for federal estate tax purposes. It creates an arrangement that automatically goes to work because of the way it is structured, and it is neither time consuming, nor expensive.

Don’t wait until it’s too late. With the help of all the king’s horses and all the king’s men, you need not meet the fate of Humpty Dumpty. Assemble your team of experienced advisors: your attorney, CPA, and your insurance consultant so you can step down off the wall with confidence and not fall.

Posted In: Business Succession

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