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<h1>Small Business Accountants Know a Buy Sell Agreement is Not Enough</h1> by wmessick True, a Buy Sell Agreement is an important document - one that will insure the continuation of your business and enable your family to receive the greatest return possible for your lifetime of work. If there is money behind it. 
If the cash isn't there a Buy Sell Agreement could end up being a disaster, because it could obligate your family, heirs, partners etc. to attempt the impossible - causing the entire enterprise to collapse along with your family's security.
Small business accountants are often consulted by the business owner and the other members of the business owner's advisory team when drafting a Buy Sell Agreement is imminent. They are consulted about business valuation, income, tax planning and similar matters. Isn't there something else they should be consulted about?
If your small business accountant has any experience at all yours is not the first But Sell Agreement they've seen. This is not there first experience with the process and they may have lived through the execution of Buy Sell Agreements their other clients have in place at their death or dissolution of their business.
The question is, should they offer advice whether requested or not, dealing with the most pressing question business owners should be asking their advisors - where will the money come from to fund the agreement, how much will it cost, and can we afford it?
You see, unless it is backed up by money, a Buy Sell Agreement is a worthless piece of paper. Ask your attorney what will happen when their perfectly crafted Buy Sell Agreement can not be executed because the money isn't there. This is a contract right? Are their possible repercussions when your family can't live up to it's terms? What are they?
If you intend for the company to stay in family hands, perhaps your son or daughter who are already in place and learning the ropes, the need for a Buy Sell Agreement is to convert some of the value of the company into cash so any other children can receive their inheritance in cash. And it's so your widow will have financial security that is not 100% dependent on the next generation's ability to run the company.
If you intend to sell your interest to a partner or perhaps to an outsider - you want the entire amount in cash if possible so all your kids and your widow will receive the maximum return on your lifetime of hard work.
There are actually only four ways you can fund your Buy Sell Agreement - to make it worth the paper it is printed on. 
You or your partner, or outsider can begin now to set the money aside in a special escrow fund untouched until needed, your estate or your outside buyer can borrow the money at your death to make the cash available for your family, your estate can set up the terms of transfer to be on an installment basis, or you can buy life insurance.
Small business accountants are uniquely positioned to give you accurate insights into which of these four options is a real possibility and just how one scenario will work out for you compared to another. Not asking your business accountant do run through this exercise should not excuse them.
You put your faith in your small business accountant to do what they know is right and to tell you about the elements of your business and other financial affairs you'd never think on your own. For example:
	Is it possible, given the current and projected status of your business, your tax bracket, and prevailing interest rates for you or your partner to set aside enough money in a separate account to complete the agreement? How much money in before tax dollars will be needed? How many dollars of additional sales are required to have that much left over? How long will it take to fully fund the agreement? Where will the money come from? What happens if you or your partner dies beforehand?
	Borrowing depends upon whether or not somebody believes you or your partner have the assets and income to repay the debt plus interest. If lenders do not have confidence that they will get their money back they won't loan it. If money is tight they may not be able to loan it. What is the additional cash flow required to repay the loan plus interest? How much money in total will be necessary to fulfil the terms of the agreement? Is this possible? Does it make good business sense?
	The installment sale is really just another way of borrowing the money - except the people you want the agreement to protect are the ones guaranteeing the loan. What if business is bad? The cash flow required will be the same unless the family gives them a break on the interest - but that doesn't seem right does it? Most people who come up with the installment idea plan to use part of the extra profits from the business to make the payments. Does that seem logical - that the business could lose you or your partner, make enough money to replace either one of you, and at the same time generate enough extra money before taxes to pay the note plus interest? Shouldn't you ask your accountant to run the numbers for you before you rely on this 19th Century business transfer approach?
	Life insurance. No matter whether you like the idea or not, life insurance is the most efficient way to make sure that funds are available exactly when they're needed. The full amount is guaranteed immediately. It's budgetable and payable in advance - while you are still around and in charge. Ask your accountant to do the numbers - compare the options, who's taking the risks, what's the bottom line etc.?
Make sure your small business accountant invites your life insurance agent to every meeting where the terms, options, and funding of the Buy Sell Agreement are being discussed. There are many types of insurance your accountant has no reason to be familiar with. Your accountant and your life insurance agent may be able to collaborate successfully on a strategy that combines all four funding approaches to create the optimum solution for you and your family business.
It is also vital that your spouse is included in these discussions and understands what's at stake. Your spouse and you should determine together what's important and consider together the best way for the agreement to provide the money that will result in the accomplishment of your objectives.
Remember, the goal is to maximize the value of your business so you and your family receive a fair return on your years spent building the business. 
And there is no substitute for cash, delivered to your family at the right time in the right amount, in the right way, and at the least cost to everyone.
 <h2>About the Author</h2>If you want to be successful, put together a team of professionals to help you. Typically, management of the progress of the team falls to the business accountants you have on board. They understand that the valuable insights of their 
<a href="http://www.FamilyBusinessAccountants.com">business accountants </a> can help them focus on what is important to them, their family, and the business - for years to come.
 <h3><a href="http://www.content4reprint.com/accounting/small-business-accountants-know-a-buy-sell-agreement-is-not-enough.htm" title="Small Business Accountants Know a Buy Sell Agreement is Not Enough">Article Source:</a> <a href="http://www.content4reprint.com" title="Free high quality articles">Content for Reprint</a></h3>

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<body><h1>Small Business Accountants Know a Buy Sell Agreement is Not Enough</h1> by wmessick True, a Buy Sell Agreement is an important document - one that will insure the continuation of your business and enable your family to receive the greatest return possible for your lifetime of work. If there is money behind it. 
If the cash isn't there a Buy Sell Agreement could end up being a disaster, because it could obligate your family, heirs, partners etc. to attempt the impossible - causing the entire enterprise to collapse along with your family's security.
Small business accountants are often consulted by the business owner and the other members of the business owner's advisory team when drafting a Buy Sell Agreement is imminent. They are consulted about business valuation, income, tax planning and similar matters. Isn't there something else they should be consulted about?
If your small business accountant has any experience at all yours is not the first But Sell Agreement they've seen. This is not there first experience with the process and they may have lived through the execution of Buy Sell Agreements their other clients have in place at their death or dissolution of their business.
The question is, should they offer advice whether requested or not, dealing with the most pressing question business owners should be asking their advisors - where will the money come from to fund the agreement, how much will it cost, and can we afford it?
You see, unless it is backed up by money, a Buy Sell Agreement is a worthless piece of paper. Ask your attorney what will happen when their perfectly crafted Buy Sell Agreement can not be executed because the money isn't there. This is a contract right? Are their possible repercussions when your family can't live up to it's terms? What are they?
If you intend for the company to stay in family hands, perhaps your son or daughter who are already in place and learning the ropes, the need for a Buy Sell Agreement is to convert some of the value of the company into cash so any other children can receive their inheritance in cash. And it's so your widow will have financial security that is not 100% dependent on the next generation's ability to run the company.
If you intend to sell your interest to a partner or perhaps to an outsider - you want the entire amount in cash if possible so all your kids and your widow will receive the maximum return on your lifetime of hard work.
There are actually only four ways you can fund your Buy Sell Agreement - to make it worth the paper it is printed on. 
You or your partner, or outsider can begin now to set the money aside in a special escrow fund untouched until needed, your estate or your outside buyer can borrow the money at your death to make the cash available for your family, your estate can set up the terms of transfer to be on an installment basis, or you can buy life insurance.
Small business accountants are uniquely positioned to give you accurate insights into which of these four options is a real possibility and just how one scenario will work out for you compared to another. Not asking your business accountant do run through this exercise should not excuse them.
You put your faith in your small business accountant to do what they know is right and to tell you about the elements of your business and other financial affairs you'd never think on your own. For example:
	Is it possible, given the current and projected status of your business, your tax bracket, and prevailing interest rates for you or your partner to set aside enough money in a separate account to complete the agreement? How much money in before tax dollars will be needed? How many dollars of additional sales are required to have that much left over? How long will it take to fully fund the agreement? Where will the money come from? What happens if you or your partner dies beforehand?
	Borrowing depends upon whether or not somebody believes you or your partner have the assets and income to repay the debt plus interest. If lenders do not have confidence that they will get their money back they won't loan it. If money is tight they may not be able to loan it. What is the additional cash flow required to repay the loan plus interest? How much money in total will be necessary to fulfil the terms of the agreement? Is this possible? Does it make good business sense?
	The installment sale is really just another way of borrowing the money - except the people you want the agreement to protect are the ones guaranteeing the loan. What if business is bad? The cash flow required will be the same unless the family gives them a break on the interest - but that doesn't seem right does it? Most people who come up with the installment idea plan to use part of the extra profits from the business to make the payments. Does that seem logical - that the business could lose you or your partner, make enough money to replace either one of you, and at the same time generate enough extra money before taxes to pay the note plus interest? Shouldn't you ask your accountant to run the numbers for you before you rely on this 19th Century business transfer approach?
	Life insurance. No matter whether you like the idea or not, life insurance is the most efficient way to make sure that funds are available exactly when they're needed. The full amount is guaranteed immediately. It's budgetable and payable in advance - while you are still around and in charge. Ask your accountant to do the numbers - compare the options, who's taking the risks, what's the bottom line etc.?
Make sure your small business accountant invites your life insurance agent to every meeting where the terms, options, and funding of the Buy Sell Agreement are being discussed. There are many types of insurance your accountant has no reason to be familiar with. Your accountant and your life insurance agent may be able to collaborate successfully on a strategy that combines all four funding approaches to create the optimum solution for you and your family business.
It is also vital that your spouse is included in these discussions and understands what's at stake. Your spouse and you should determine together what's important and consider together the best way for the agreement to provide the money that will result in the accomplishment of your objectives.
Remember, the goal is to maximize the value of your business so you and your family receive a fair return on your years spent building the business. 
And there is no substitute for cash, delivered to your family at the right time in the right amount, in the right way, and at the least cost to everyone.
 <h2>About the Author</h2>If you want to be successful, put together a team of professionals to help you. Typically, management of the progress of the team falls to the business accountants you have on board. They understand that the valuable insights of their 
<a href="http://www.FamilyBusinessAccountants.com">business accountants </a> can help them focus on what is important to them, their family, and the business - for years to come.
 <h3><a href="http://www.content4reprint.com/accounting/small-business-accountants-know-a-buy-sell-agreement-is-not-enough.htm" title="Small Business Accountants Know a Buy Sell Agreement is Not Enough">Article Source:</a> <a href="http://www.content4reprint.com" title="Free high quality articles">Content for Reprint</a></h3></body></html>