Without a plan, the departing owner or owner's survivors stand to lose both value and income from the owner's investment in the business and the remaining owners stand to lose some or all of their investment or to see their control diluted. This involves the development of a written business continuation plan that specifies what will happen to each owner's interest when he or she leaves the business due to retirement, disability or death. The plan should also indicate the value of each owner's interest. This is critical if a departing owner's interest will be purchased by the business or by the remaining owners. Without funding, there is no way to guarantee the plan can be implemented when the time comes for an owner to leave.
Life insurance is one way to effectively fund a business continuation plan.