How Sole Practitioners Plan for Succession

Source: Practical Accountant

Certain events, such as temporary or permanent disability, retirement, or death, are more critical to sole practitioners than to larger firms. Here is what some practitioners do about them:

• Enter a practice continuation agreement with another firm to protect you from temporary disability.
• Enter a buy-sell agreement to protect your firm against your permanent disability or death.
• Prepare a document that instructs staff on how to handle matters while you are gone.
• Identify a successor.
• Sell the practice with a provision for staying involved.
• Define permanent disability and incorporate that into the various documents above.

To plan for retirement consider:

• Hiring an accountant and allowing him/her to gradually learn your job. Enter a purchase agreement with this person.
• Selling to another firm with an earn-out provision and a period of time to transition out.

For the complete article, click here and select Succession Scenarios for Sole Practitioners in the January 2008 issue.

From Practical Accountant, January 2008, SourceMedia Inc., One State Street Plaza, 27th Floor, New York, NY 10004, 800-221-1809.

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