Before discussing the continuation of the business should the owner exit the business, it may be helpful to discuss the probability of the owner’s unexpected departure. Of course, the most common event resulting in an owner’s exit would be death. What is the chance that a 50-year-old business owner will die before retirement? Almost 12%ⁱ. What are the chances of one owner dying before retirement if there are two owners, a male age 55 and a female age 45? Almost 20ⁱⁱ. What are the chances of one owner dying before retirement if there are three owners, a male age 45, a male age 50, and a female age 55? Almost 30ⁱⁱⁱ. With three, healthy middle age owners, almost a 30% probability of one of them dying before retirement.

There is a real chance that a business owner might die before retirement. What would happen if an owner died last night? Would there be a willing buyer for the business interest available today? How would the value be determined? Would the owner’s family get a fair price? Where would the money come from to pay for owner’s interest? Would the willing buyer have the cash available? Without a plan, these questions won’t have favorable answers.

i Commissioners 2001 Standard Ordinary Mortality Table: 11.6% if retirement assumed at age 65.
ii ibid. 18.9% if retirement assumed at age 65.
iii ibid. 28.9% if retirement assumed at age 65.