There's no getting around it: Setting up and financing a buy-sell arrangement will be another expense for your company. You can expect to pay roughly $1,000 to $5,000 to prepare the agreement, according to Rogers. The insurance premium means an additional monthly expense, but just how big a premium depends on a number of factors, including the value of the business, the amount of insurance you purchase and your age.
While this may seem expensive, Rogers says the peace of mind the arrangement creates is worth the money. "In addition, proper planning means business owners and their families won't have a `fire sale' mentality upon the death of one of the owners, which could result in a quick and unwise sale of the company," he says. "Often, small-business owners and their families feel forced to sell a business to acquire the money needed to pay federal estate taxes, which can consume more than 50 percent of an estate."
Keep in mind that the time to do this type of planning is when you start the business and that your plans should be adjusted as the business evolves. Fleming recommends taking a look at the plan again when your children become adults to decide whether to bring them into the business. When all is said and done, it's well worth the time and expense.
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Kauffman, Freeman & Rogers PC, 1767 Sentry Pkwy. W., #320, Blue Bell, PA 19422-2245, fax: (215) 542-9395