Putting Your Business Partner In a… Bubble?!

So you’re telling me that your business partner doesn’t want to live in an impenetrable bubble?! So, how do you protect them from ever getting hurt or even… die?! Because the thought of losing your business partner, or even that ever so valuable employee of yours pushes you to reach for the antacids in your medicine cabinet.
Creating a partnership through a merger, an acquisition, or just having the desire to go into business with a friend or colleague of yours may create a perfect cocktail for success. But planning ahead is often pushed under the rug with the excitement of putting your partnership together. Unfortunately, this is something that needs to be thought of now… instead of coping with it after the fact.

As I have said in previous articles, all business owners will leave their company in one way or another. Whether it is on your own terms, or through some brand of disaster to where you don’t have a choice in the matter. In either instance, all paths may create a profitable and/or positive situation.
So, what happens if you are not properly prepared? Let’s use the example that your business partner suddenly passes and you are left to manage the company on your own. But unfortunately, this may not be the case. Let’s use the scenario that your business partner is married; in most industries, you are now in business with your deceased business partner’s spouse! Was that part of the plan? Then here are a few options on the table:

1) Continue doing business with your new found business partner, who may or may not have any knowledge of the industry you are in.

2) Offer a systematic or lump sum buyout to your new business partner, which may become be very costly.

3) Travel back in time and purchase a life insurance policy to where the business owns a policy on your partner’s life. When he/she passes, the company can then buyout your partner’s spouse in return for their share of the company.

The third option would be considered a Buy/Sell Agreement funded with a life insurance policy. Referencing what I said earlier in this article, this situation could create a path that would not necessarily create a positive situation, but may present a profitable one. This is where taking the time to have a conversation with your financial advisor and your attorney may determine the future of your partnership.

There are many other scenarios not unlike this one that should be brought up in your discussions about your business plan. And as mentioned earlier, all business owners will leave their company in one way or another. Whether it is on your own terms, or through some brand of disaster to where you don’t have a choice in the matter. In either instance, all paths may create a profitable and/or positive situation.

Registered Representative Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and Conte Wealth Advisors are not affiliated.