You Have Options

What if you could protect ownership from outsid- Beware of

ers? Business Financial
What if this arrangement could also help provide for
your late partner’s family?
Hazards
Part 2
What if you could infuse the company with cash to
offset some revenue lost at the death of a partner and Loss of Revenue or Control of Your Business at the
protect cash reserves from depletion? Death of Your Partner: Can You and Your Business
What if the same strategy also improved your busi- Survive Having Unexpected Partners?
ness cash performance on an income-tax free basis?
Your Business Partner
What if you could fund such an arrangement for the
cost of one (or less) of the employees on your payroll? Most business owners chose their partners because
What if it could also supplement your retirement? of their skills, background, capital, talents, and abilities.
For many successful ventures, it was their partnership
What if there was a way to create the dollars needed
that allowed them to get where they are today. Without
in the future for pennies on the dollar today?
the valuable contributions of each partner, many busi-
Let’s Talk nesses would drastically change or decline.
There are several powerful strategies that can help If something happened to your partner, how would
you accomplish these, and many other, business plan- that impact your business? Would revenue decline?
ning goals. Let’s sit down and talk and you can decide if Would recruiting or payroll expenses go up? Would
any of these strategies might be of interest to you. growth plans halt? Would your ex-partner’s heirs
(children, spouse, parents) be your new business part-
Ardal Powell, MA, PhD
ners? Would they have the relationships, experience, and
New York Life/NYLife Securities
ability to run the business like your partner did before?
460 Temple Hill Rd
Who would control business decisions? Would heirs want
New Windsor, NY 12553 to sell or distribute assets to get cash out of the busi-
(845) 202-9722 ness? Would they want to fire or hire different employ-
apowell03@ft.newyorklife.com ees, or close the business altogether?
New York Life Insurance Company, its agents and employees may not provide legal, tax or accounting
advice. Consult your own professional advisors before implementing any planning strategies. © 2018
New York Life Insurance Company. All rights reserved.
SMRU 1778791 (exp. 06.30.2020)
Advanced Planning Group

Many business owners haven’t considered the ex-
tent of the financial losses and loss of control that can
flow from the death of a partner. How much could reve-
nue loss from death of a partner impact your business?
Let’s look at a hypothetical example.
If something happened to your partner, who
would be their heir (your new partner!), and
how much could a temporary revenue
decline set back your business?
LocalClean, Inc. is a successful regional provider of in-
dustrial cleaning services and supplies. The company is
growing rapidly. Last year, they had $2 million of revenue,
expenses of $1.8 million, and a profit of $200,000. Samuel
and Andrea are 50/50 owners and each generates about
half of company sales. Company cash reserves total
about $300,000.
Without proper planning, if Andrea died unexpect-
edly, her ownership could pass to inexperienced or less-
business-savvy family (Samuel’s new business partners!)
and LocalClean could lose all of its profits and cash.
Let’s Look at the Numbers
If Andrea died, her share of ownership would pass to
her family (spouse, children, parents). Inexperienced
heirs would have half of the control over company
operations and decisions. Without her knowledge and
personality what if they could only produce 50% of
Andrea’s prior revenue? Without property planning in
place, let’s look at the potential financial harm to
LocalClean that could result.
$1,000,000 (Andrea’s prior revenue produc-
tion)
X 50% (reduced productivity of heirs)
$500,000 (Andrea’s heirs’ revenue)
+ $1,000,000 (revenue from Samuel)
$1,500,000 (total revenue)
-$1,800,000 (LocalClean expenses)
-$300,000 (loss; consumption of cash re-
serves)
Even a thriving business can be crushed by unex-
pected or inexperienced new partners who are unable
to produce the same level of revenue. And how much
worse could things be if those partners don’t want to
drive revenue (0% vs. 50% of Andrea’s production) or
move to sell the business outright. All of this can hap-
pen if the heirs have different plans or ideas for the fu-
ture of the business!