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Impact Advisors Group | Duxbury Massachusetts | Warrington Pennsylvania
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Defending Your Business Against Internal and External Threats

Business Planning: Defending Your Business Against Internal and External Threats

Author: Brandon Jordan, CFP®, CHFC®, CEPA®, CVGA®, CLU®, MSA, EA | CEO of Impact Advisors Group

Phase II of IAG’s Business Planning process is to “Defend” the business from internal and external threats.

Sample Internal Threats

  • Owner Dependence
  • Key Employee Dependence
  • Disagreement (among owners, leadership, executives, etc.)
  • Divorce

Sample External Threats

  • Supplier Concentration
  • Vendor Concentration
  • Customer Concentration
  • Lawsuits
  • Distress (e.g. pandemics, data breaches, supply chain disruption, worker safety, etc.)
  • Disability
  • Death

Death of a business owner can wreak havoc for a business and often results in the business closing its doors. A common and effective approach to defend against this threat is a well drafted AND funded buy-sell agreement. A recent Supreme Court Ruling (“Connelly v. United States”) has materially shifted the landscape for business owners in how to defend against the tremendously negative impact of the death of one of the business owners. Prior to this ruling, the life insurance, which is the most commonly used tool to fund a buy-sell agreement, proceeds were NOT included in the valuation of the company. As a result of the Connelly decision, the proceeds received in a redemption style buy-sell agreement, ARE includable in the valuation of the business. This inclusion is a big deal because it drastically increases the death tax liability of the deceased party’s estate… and now may not have the available funds to settle that obligation with the IRS.

This isn’t bad news per se. Rather, it’s only bad news IF business owners are unaware and thus don’t plan accordingly. Don’t be one of them!

IAG is a member of the XY Planning Network (“XYPN”). Not only does XYPN help us to have best in class compliance programs and tech stack, this membership-only network also provides us with valuable information from the industry’s top thought leaders. XYPN’s Ben Henry-Morland is one of them. His assessment of the Connelly decision and buy-sell agreement structuring is quite insightful.

Let IAG help you defend your business against this threat review, create, and/or modify your buy-sell agreement to reflect the material changes caused by the Connelly decision. Your business, your employees, and your family depend on getting this right.

Impact Advisors Group LLC (“[IAG]”) is a registered investment advisor offering advisory services in the State of Massachusetts and in other jurisdictions where exempted. Registration does not imply a certain level of skill or training. The information on this site is not intended as tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. This information should not be relied upon as the sole factor in an investment making decision. Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any recommendations made will be profitable or equal any performance noted on this site. The information on this site is provided “AS IS” and without warranties of any kind either express or implied. To the fullest extent permissible pursuant to applicable laws, Impact Advisors Group disclaims all warranties, express or implied, including, but not limited to, implied warranties of merchantability, non-infringement, and suitability for a particular purpose. IAG does not warrant that the information on this site will be free from error. Your use of the information is at your sole risk. Under no circumstances shall IAG be liable for any direct, indirect, special or consequential damages that result from the use of, or the inability to use, the information provided on this site, even if IAG or a IAG authorized representative has been advised of the possibility of such damages. Information contained on this site should not be considered a solicitation to buy, an offer to sell, or a recommendation of any security in any jurisdiction where such offer, solicitation, or recommendation would be unlawful or unauthorized.