1. Business Planning: Business Continuation Benjamin Rich Financial Advisor A9JC-0422-10

2. Youve Worked Hard to Build a Successful Business. Have you Worked as Hard to Protect it From These Risks?

Death

Disability

Losing a key employee

3. A key consideration in planning for the success of your business is understanding its value. What is your business worth? What will it be worth in 5, 10 or even 15 years? 4.

Your business is successful. Your customers are happy. Your family is enjoying a comfortable lifestyle. And years of hard work are finally paying off. So

What would happen if you were suddenly disabled?

Or if you die unexpectedly?

Or if you simply decided its time to retire?

So, What Is It? Youve built your business 5.

Without proper planning planning for the continuation of your business without you your lifetime of achievements could be exposed to potentially devastating problems.

Customers who do business with you, because of you, could go elsewhere

Key employees could start looking for other opportunities

Family members or business partners could begin disagreeing over who gets what and who should make day-to-day business decisions.

6.

A potential shortage of cash

Difficulty paying debts

Inadequate income for you, your spouse & your heirs

The liquidation of assets and ultimately, your company, to payfederal and state taxes

Insufficient retirement income

Inequitable treatment of heirs

Estate erosion

Failure of the business

So, What Is It? The possible results 7. So, What Is It? With proper business continuation planning, you can help ensure thatyour business, and the people whose incomes & lives depend upon it, will succeed when youre no longer around. 8. Usually called a buy-sell agreement, proper business continuation planning answers the question, Who will take over my business should I die prematurely, become disabled, or simply decide to retire? So, What Is It? Business Continuation Planning is developing, and then implementing,a plan of succession. 9.

You and your partners

Your business and its owners

You and other family members

You and a key employee or employees

Depending on how your business is owned, this agreement can be established between: 10.

A properly structured buy-sellagreement will:

Pre-determine who will receive your business

Set the purchase price and terms of payment

Establish the value of your business for federal taxpurposes

Specify how the transfer will be funded

Provide the cash needed to pay federal and statedeath taxes, debts, & other estate settlement costs

11.

It will also address potential problems before they arise by providing:

Estate liquidity

A source of income

A known purchaser and a set price

Tax valuation

Successor ownership and management

A funding vehicle

Improved relationships

12.

Entity buy-sell agreement the business entity agrees to purchase the interests of the individual owners

Cross-purchase buy-sell agreementthe individual owners all agree to purchase the interests of the others

Wait and see buy-sell agreementthe stockholders and business agree that either one will have the first option to buy the interests of each other, depending on which is most advantageous

What Are Your Options? *A fourth type of buy-sell agreement deals with the disposition of a business following the total disability of a business owner. A disability buy-sell agreement can be set up as either an entity or cross-purchase plan. Three types of buy-sell agreements*: 13. Consider the following real-life IRS challenges to what these individual business owners thought their businesses were worth. 14. Note: These results are based on specific cases that may or may not be representative of other situations and cases. 15. A properly drafted buy-sell agreement could save you, your company, and your heirs thousands of dollars and ensure that your assets are passed on quickly and without delay. 16. What are the funding alternativesfor buy-sell agreements?

Business Cash

Sinking Fund

Borrowed Funds

Installment Payments

Life and Disability Insurance

17. The following chart indicates the odds of at least one death occurring before age 65 to any one person out of one, two, or three persons. Do I Really Need One? Do you really need a buy-sell now? 18. In addition to providing a plan of succession, business continuation planning can also save you thousands of dollars and hours by eliminating the potential costs, delays, and frustration of IRS contests & litigation.Finally 19. Do I Really Need One?

When properly drafted, a buy-sell agreement will establish the value of a business for the purpose of federal estate and gift taxes. But in order to do so, the agreement must first meet 3 requirements:

It must be a genuine business arrangement.

It must not be a device to pass the business interest to family members for less than full value.

It must be comparable to similar arrangements entered into by other persons in an arms length transaction.

20. A Secure Financial Future DoesntHappen by Accident

It requires:

Examining your current circumstances

Identifying your goals and objectives

Developing a plan to achieve those goals and objectives

Taking action to implement your plan

Periodically reviewing your plan.

21. This information should not be construed as tax advice applicable to each individual.Please consult a qualified tax advisor regarding your individual circumstances.2009 The Penn Mutual Life Insurance Company, Philadelphia, PA 19172.www.pennmutual.com.A9JC-0422-10