Many small businesses rely heavily on the skills and knowledge of one or two key people. Without that person, the business would be worth far less money. Often, that key man or woman's income from the business represents a substantial share, or the entire share, of income for that person's family. Proper Key Man planning consists of preparing for the worst, and preparing for succession.
"Key Man" Insurance
Preparing for the worst means preparing for the loss of income earning potential for the key person(s) in a company. The classic example is the president/chief designer/builder/bottle washer of a company getting hit by a bus. Now what? In order to replace the income from that person, allow the business to pay off creditors, meet final payroll, and wind up operations in an orderly fashion, having "Key Man Insurance" can be a critical planning step. I can work with you and your insurance broker to create an insurance policy with enough money in it to allow a company to wind down and make sure everyone is made whole in the process. Such policies are often not especially expensive, so long as the key persons are in reasonably good health, because they are usually based on a term life insurance policy and are expected not to ever be collected.
Continued Involvement After Sale
The key personnel of a company are often what give the company value as a going concern. When it is nearing time for those key people to move on to new careers, or no careers, and the business wants to sell out, buyers will want the knowledge, skill, personality, etc., of those key people while the business' clients and customers are transitioned to the new company. We can help structure new employment agreements which both allow the new owners to call upon that knowledge and those skills, while also allowing the key people the flexibility of time to pursue other endeavors.
Attorney responsible for content of this site: David L. Howell. No attorney described here is certified by the Texas Board of Legal Certification in any specific area of practice. Copyright Law Offices of David L. Howell. All rights reserved.
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