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Modern Woodmen Fraternal Financial Small Businesses Planning for Today and Tomorrow


Chances are, you or someone you know owns a chiropractic, dental or tax-service practice, or someone who owns an auto body shop, bar and grill, lawn care service, or something similar. Maybe you or a family member owns a farm. More than 99 percent of all U.S. businesses are considered small businesses according to the U.S. Small Business Administration’s 2016 small business profile.

As a financial representative for Modern Woodmen of America, I don’t just understand the complex planning needs for small businesses, I experience them daily when running my practice.

As a business owner, you have a never-ending list of things requiring your attention. Planning for the continued success of your business is often set aside until later. Don’t let later be too late for you. By putting a plan into place now, you can protect yourself, your family, and your employees. Make sure your business survives no matter what life may throw at you: premature death, disability, retirement, or even if you decide to leave the business to pursue other interests.

Let’s take a look at a few different aspects of the business life cycle and the corresponding planning needs.

The new business
Starting a business took a lot of your time and energy. You should put just as much thought into protecting it.
As a new business owner, you have unique needs.

  • Retiring debt
  • Insuring key employees
  • Diversifying your assets

It’s critical to consider what might happen to your business and your family if something were to happen to you.

The established business
You’ve made it. Your business has now reached a level of success and stability. Day-to-day survival has become less pressing, but other concerns continue to exist, such as…

  • Attracting and retaining quality employees
  • Preparing the business to transfer to family, a fellow business owner, employees, or an outside buyer someday
  • Preparing for an eventual and comfortable retirement

Business continuation — what is your business worth?

The first step in planning for the continuation of your business is determining its value and its potential future growth. Have you completed a recent full business valuation? Do you know what your business is worth right now?

Once you determine its worth, you can plan for its eventual sale or transfer in a way that protects you, your family, and your employees. Business continuation planning is essentially preparing in advance for the sale or transfer of your business interest following a triggering event, like…

  • Death
  • Disability
  • Retirement
  • Divorce
  • Bankruptcy

The primary purpose of buy-sell planning is to determine the following:

  • Who will purchase your share of the business
  • The price and terms of the payment for that share
  • The value of the business for federal tax purposes — how the transfer will be funded
  • In case of death, how to carry out the transfer while ensuring that taxes, debts, and other settlement costs don’t put the business (or
  • your family’s financial security) in jeopardy.

Consult your tax professional before making a decision.

Types of buy-sell agreements
You can structure buy-sell agreements in several ways. Which method is right for you depends largely on how your company is set up, how many owners/partners there are, and how long you’ve been in business. The following are the most commonly used buy-sell agreements:

  • Cross purchase
  • Entity purchase
  • Partnership
  • Wait and see

The benefits of a buy-sell agreement, especially to a small or family-owned business, cannot be overstated. If structured properly, it can address and help eliminate potential problems or issues before they arise. Here are just a few benefits of a well thought-out buy-sell agreement:

  • A known buyer for your business
  • A known purchase price
  • Estate liquidity
  • Business value
  • Stability
  • Improved access to credit
  • Greater retirement security

While these types of agreements can be helpful in reducing paperwork and affecting a smooth business transfer, they can also be very complex. They should be drafted and reviewed by an attorney.

Funding a buy-sell agreement
A buy-sell agreement may settle many potential issues well in advance. That means your family, business partners, and key employees won’t be burdened with the considerable time and cost of straightening everything out after you’re gone. One major question remains — how will you fund it?

There are many funding alternatives:

  • Cash flow
  • Sinking fund
  • Borrowing
  • Installment payments
  • Life and disability insurance

It’s important to sit down with an experienced professional who will work to understand your business’s unique needs. I work with many small-business owners to plan funding for buy-sell agreements and also with many other aspects of business planning, such as employee benefits and retirement planning. Working together, we can help you put a plan in place to protect your business today and tomorrow.

Let’s start the conversation. Contact Ruth Ahnen, FIC, of Modern Woodmen of America, located at 2435 E. Kimberly Rd., Suite 310S, in Bettendorf. Call 563-508-0842, or e-mail ruth.ahnen@mwarep.org.

Founded in 1883 as a fraternal benefit society, Modern Woodmen of America offers financial services and fraternal member benefits to individuals and families throughout the United States.