Greg and Ralph ran a highly successful $18 million-a-year contracting business. They are astute, organized businessmen almost fanatic about careful planning. They had protected assets with an LLC structure, funded a well-drawn buy/sell agreement with adequate life insurance and reviewed it for needed adjustments annually. Greg and Ralph felt comfortable that they were well-prepared and protected.
Then a year ago, Ralph had a heart attack that left him disabled and totally unable to work. Greg had to shoulder all responsibility for the business and was obligated to continue paying Ralph’s salary and share of profits. Ralph’s specialized talents and connections were the most valuable asset of the business. And without Ralph, the business declined rapidly – yet Ralph’s salary and benefits continued to flow out causing a substantial financial drain on the company. The only alternative for Greg was to close the business – putting Greg was out of work and Ralph left with no source of income.
If ConcentrixWealthAdvisors had been invited to review Greg’s and Ralph’s situation, we would have called attention to one of the biggest and most often neglected areas of business – DISABILITY. So many business owners focus on planning for death of a partner, but neglect the eroding, paralyzing effect of partner disability. No Buy/Sell is complete without Disability Buy/Out protection.
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