It is not enough to think only about the people who might take over your business after you have stepped down or passed away- you need to think about the funding considerations that come with such a concern. That’s why funding the plan is an important component of your overall guidelines, and it’s something that should be discussed with your business succession planning attorney. 

Some of the most common issues to consider under this umbrella include:

• Terms of the agreement
• Price
• Future involvement of the seller

When the business transfers from the seller to buyer, all three of these factors should be considered carefully.

If the seller opts to finance the transaction, common methods might include lines of credit, creation of an ESOP, set-aside funds, or insurance. Buyer financing is usually accomplished through the securing of investors or third-party borrowing. Securing investors helps to avoid the need for collateral determination.

Compromise arrangements might be an option, too. This means that the buyer pays a portion of the sale price while leaving the seller with a note for the remaining amount. If you have more questions about planning ahead for business succession, contact an experienced attorney today.