If I already have a buy-sell agreement, why do I need a business succession plan?

Minneapolis attorney Sally Grossman discusses why a business owner should consider a business succession plan.

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Transcript:

A buy-sell agreement is an important component of a business succession plan, but it’s not the same thing. You really do need both. A buy-sell agreement, just to review, is a contract between the business owner and either the other shareholders or possibly the business owner and the company that says what happens to the business interests either during life or at death.

It’s helpful for accomplishing a lot of business objectives, but it doesn’t deal with one really important thing that the business succession plan deals with and that is not just transition of ownership, but transition of management. Who is going to run the company after the entrepreneur is no longer involved?

In a business succession plan will deal with that. It should identify a successor. It should set forth the owner’s goals, vision for family involvement, maybe some history of the company. It will have specific goals and then it will say how we attain those goal. And the estate plan might be part of that incorporated by reference. Here is what happens to the stock. Go look at the estate plan at death, but it won’t cover a whole lot of other things, so you really need to have both.