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80 July 2014 | beautystorebusiness.com of a family member who dies. Valuable as it is though, life insurance is not the final answer. The fact is that an owner can be incapacitated while still living. "With today's modern medicine a person can have a stroke or a heart attack and continue to live," notes Schwerzler. An owner who is incapacitated in that way can no longer function in the business. Yet there is no life insurance money to buy out the individual's stock at a time when large medical bills must be paid. "How will the business deal with that?" poses Schwerzler. "How will that exit from the business be exercised?" The wise family business will plan for alternative funding sources. RESOLVE DISPUTES Try as you might to avoid them, domes- tic squabbles are bound to occur. As an adjunct to your buy/sell agreement, write up a procedure that will be used to resolve disputes between family business owners. For some situations, arbitration or mediation may be the best course of action. Alternatively, you may designate a board of nonfamily trustees who are empowered to cast the decid- ing votes on issues over which family members disagree. Disputes often arise from the conflict- ing interests of siblings or other family members inside and outside the business. "I tell my clients not to have siblings or family members outside the business co-own the business with family members who run it," says John J. Scroggin (scrogginlaw. com), a partner in Atlanta-based Scroggin & Co., a law firm active in business and estate planning. "It never works. You have tied them together financially, but they and their families have different goals, which inevitably breeds conflicts." In a typical situation, says Scroggin, a family member inside the business is working 24/7 and resents the fact that a substantial part of the equity value he or she is building is going to other fam- ily members. Meanwhile, the outside siblings are upset because the family member operating the business is get- ting a "significant" salary and doesn't value the opinions of the nonworking family owners. Solution? "I suggest giv- ing the nonbusiness family members other assets," says Scroggin. "Or set up a mechanism that gives them an income stream that is not connected to the family business." As the above comments suggest, varied skills are required to iron out family business wrinkles. Don't try to write a buy/sell agreement without the assistance of experts, including your attorney and accountant. You may also want to utilize the services of a consultant who specializes in family businesses. (See "Get Some Help," page 78.) REVISIT THE DOCUMENT As years pass, personal and business goals change. Your buy/sell agreement needs to change with the times. "Don't just create your buy/sell agreement and stick it in a drawer," says Schwerzler. "Have a CPA or tax attorney review the document every two or three years." Modifications will need to reflect changes in family relationships and in tax laws. Above all, avoid a temptation to procrastinate. "At small- and medium-size businesses, creating a structure for transition is often shunted aside for lack of time," says Schwerzler. That can be fatal for the future of the enterprise. "Any family business should have a transition plan in place—and a buy/sell agreement is an important part of that plan," he says. ■ Phillip M. Perry is a New York City- based freelance writer. B u y / S e l l A g r e e m e n t s W h a t Y o u S h o u l d K n o w . i n d d 8 0 Buy/Sell Agreements What You Should Know.indd 80 6 / 3 / 1 4 4 : 4 8 P M 6/3/14 4:48 PM