Business Law · Business Continuity Planning
If you were gone Monday, does the business open?
Either a document answers that, or your family and your partner will argue about it.
A closely held business is usually the largest asset a family owns and the one least prepared to survive its owner. The value is concentrated in a person: the relationships, the pricing judgment, the signature on the credit line. When that person dies or is suddenly unable to work, the business does not pause politely while everyone sorts it out. Payroll runs Friday. The bank calls the note. The surviving partner is now in business with a grieving spouse who has never worked there. Continuity planning is the unglamorous work of deciding all of that in advance, in writing, while everyone is healthy and getting along.
The events to plan for
Death, disability and departure look identical to a bank.
Death of an owner
The interest passes by the operating agreement, the will, or Missouri intestacy — in that order of precedence, and most owners assume the wrong one controls. Without a buy-sell, the surviving owner may find themselves partnered with an estate, a spouse, or several children.
Disability or incapacity
Harder than death, because nothing formally changes. No one is appointed, no one is removed, and the company has an owner who cannot sign and cannot be replaced. Banks freeze, vendors wait, and the definition of “disabled” that nobody wrote becomes the whole argument.
Voluntary departure
An owner retires, moves, or simply loses interest. Without a price and payment terms fixed in advance, the exit becomes a negotiation between one person who wants a number and one who has to fund it out of cash flow.
Divorce
A marital interest in a business is divisible property. Absent transfer restrictions, an owner’s former spouse can end up holding an interest in a company they have no role in — and a valuation fight inside a divorce case is expensive for everyone, including the co-owner who is not a party to it.
Deadlock or falling-out
Two owners who can no longer work together and no mechanism to separate them. The company deteriorates while the dispute runs. A buy-sell with a forced-sale mechanism converts that into a transaction with a price.
Loss of a key non-owner
The operations manager who holds the vendor relationships, or the estimator every bid depends on. Not an ownership problem — a documentation, cross-training, insurance and retention problem, and just as capable of ending the business.
The buy-sell agreement
Four questions, answered before anyone needs the answers.
Nearly all of continuity planning between co-owners reduces to one document, and that document has to do four things. Missouri gives you wide latitude here — RSMo § 347.081 directs courts to give “maximum effect to the principle of freedom of contract” in enforcing LLC agreements — which means whatever you write will be honored, and whatever you leave out will be filled in by default rules you never chose.
Triggers
Which events start the machinery: death, disability, retirement, resignation, removal for cause, bankruptcy, divorce, an attempted transfer to an outsider. “Disability” needs a real definition — who decides, on what standard, after how long.
Price
A formula, a periodic agreed value, an independent appraisal, or a combination. Vague valuation language is the most litigated sentence in these agreements. If two reasonable people can reach different numbers, you have not finished drafting.
Funding
Where the money comes from. Life insurance, disability buyout coverage, a sinking fund, an installment note, borrowing. A price with no funding source is an unenforceable wish.
Terms
Lump sum or installments, over what period, at what interest rate, with what security. The surviving owner has to be able to run the business while paying for it — a buyout that strips the company of working capital helps nobody.
A St. Louis roofing company changed how these are structured nationwide. In Connelly v. United States (decided unanimously on 6 June 2024), two brothers owned Crown C Supply in St. Louis. The company held life insurance on each of them to fund a redemption of the deceased brother’s shares. When Michael Connelly died, the estate valued his shares without counting the insurance, on the theory that the redemption obligation offset it. The Supreme Court disagreed: the proceeds are a corporate asset that increases the company’s value, and the obligation to redeem does not offset it. The estate tax bill rose accordingly. If your buy-sell is a company-owned, entity-redemption structure funded with company-owned life insurance — the most common design in Missouri — it should be reviewed. Cross-purchase arrangements and insurance LLCs are now the usual answers.
Funding the buyout
The money has to exist on the day it is owed.
Cross-purchase. Each owner personally owns a policy on the other and buys the deceased owner’s interest directly. The proceeds stay outside the company, which is the structural answer to Connelly, and the survivor gets a stepped-up basis in what they purchase. It becomes unwieldy past three or four owners, because each owner needs a policy on every other.
Insurance LLC. A separate entity owns the policies and is owned by the shareholders. It preserves the cross-purchase result while requiring only one policy per insured — the standard fix for a company with several owners, and worth the modest administration it adds.
Entity redemption. The company owns the policies and redeems the interest. Simple, familiar, and now carrying the estate tax consequence Connelly described. It is not wrong in every case — for an estate comfortably under the exclusion it may not matter — but it should be a chosen structure rather than an inherited one.
Disability buyout coverage. Frequently omitted, though disability is the more likely event during a working career. Separate coverage, with an elimination period matched to the definition of disability in the agreement.
Installment notes and sinking funds. Where insurance is unavailable or unaffordable — an older owner, a health history — the buyout is funded from future cash flow. That requires a defensible interest rate, security, and a note the surviving business can actually service.
Incapacity
The plan for the owner who is still alive and cannot sign.
Death at least triggers a legal process. Incapacity triggers nothing. The bank will not accept a spouse’s instruction, the payroll service will not release funds, and the operating agreement usually says nothing about who acts. Missouri’s durable power of attorney statute, RSMo § 404.710, allows a broad grant of authority — but the powers it confers have to be granted expressly, and a generic form drafted for personal finances routinely fails at the business.
Authority to run a business
The power of attorney should expressly authorize operating the business, voting the ownership interest, signing on company accounts, hiring and firing, and dealing with lenders. Missouri’s statute allows it. The document has to say it.
Named successor management
The operating agreement or bylaws should name who manages if the manager cannot — by name and by office, with an alternate. The worst version of this is a company where the only person with authority is the one in the hospital.
Bank and vendor access
Signature cards, online banking credentials, merchant accounts, the payroll provider. Every one is administered by an institution with its own rules, and none of them care what your operating agreement says until someone presents the right document.
Digital keys
Domain registrar, hosting, email administration, accounting system, the phone that receives the two-factor codes. Businesses have been effectively destroyed by the loss of a single administrator account.
The interest itself, in trust
An ownership interest titled in a revocable trust avoids probate on death and lets a successor trustee act during incapacity without a court. It has to be coordinated with the transfer restrictions in the operating agreement, which frequently prohibit exactly this transfer unless it is expressly permitted.
A written definition of “disabled”
Two physicians, a defined period, a designated decision-maker. Without it, an owner who is unwell but disputes it produces the ugliest kind of business dispute — one where the merits are medical and the stakes are the company.
Succession
Two of your four children work here.
Family succession fails on fairness, not on tax. The business is most of the estate; two children have spent fifteen years building it and two have careers elsewhere. Dividing it equally makes the working children partners with siblings who want distributions rather than reinvestment. Dividing it unequally requires an honest conversation nobody wants to have.
The workable answers are structural. Equalize with other assets, or with life insurance bought for that purpose. Give the working children voting interests and the others non-voting interests, so ownership and control are separated deliberately. Sell rather than gift, on a note the business can service. Or decide that the business will be sold at your death and that the estate distributes cash — which is a legitimate plan, and a relief to say out loud.
The transfer itself is ordinary work: gifting on a schedule, valuation with discounts for lack of control and marketability, coordination with the federal exclusion, which the One Big Beautiful Bill Act made permanent at $15 million per person. What is not ordinary is the family meeting. It is the part owners postpone for a decade, and it is the part that determines whether any of the documents matter.
This is where business law and estate planning stop being separate practices — the buy-sell, the trust, the will and the tax plan have to say the same thing, and frequently they do not.
Meet Derek Haake
He has settled the estates where the business was the whole problem.
Derek spent three years as a Vice President and Estate Settlement Officer at Bank of America Private Bank — the country’s largest provider of managed personal trust services — administering estates for families whose wealth was concentrated in closely held companies. He has been the institution on the other side of the table when a business owner died without a plan: valuing the interest, dealing with the surviving partner, and explaining to a family why the number they expected is not the number that exists.
He has also been the owner. He was Vice President of Development at Campus Shift, and spent thirteen years in technology, ending as Vice President of Development at OptiCon where he assisted in the negotiations and due diligence for the acquisition of intellectual property from a business unit of Corning Cable Systems.
And he drafts the documents and litigates them. Almost fifteen years of business and estate disputes means the buy-sell he writes is written by someone who has watched the ambiguous ones get argued about in front of a judge.
Common questions
Continuity planning in Missouri, answered.
What happens to my share of the business if I die without a plan?
It passes according to a hierarchy most owners guess wrong. The operating agreement or shareholder agreement controls first, if it addresses death. If it does not, the interest passes under your will, and if there is no will, under Missouri’s intestacy statutes.
The practical result is usually that your spouse or children inherit an ownership interest in a company they do not work in, alongside your business partner. In many LLCs what they inherit is an economic interest only — a right to distributions with no right to vote, no right to manage, and no ability to force a sale.
That outcome is bad for everyone. Your family holds an illiquid asset producing nothing they control; your partner is answerable to someone with no role. A buy-sell agreement converts it into a defined price paid in cash, which is what both sides actually want.
Do I need a buy-sell agreement if I am the only owner?
Not a buy-sell — there is no co-owner to buy from you. You need a different set of documents, and the need is more urgent, not less.
A sole owner’s business stops when they do. What it needs is named successor management with authority to act from day one, a durable power of attorney under RSMo § 404.710 that expressly covers business operations, the interest titled so it avoids probate, and a written decision about whether the company is to be sold, transferred to a family member, or wound down.
Consider as well who would actually buy it. Many owner-operated businesses are worth substantially less without the owner, which is itself worth knowing while there is time to change it — by documenting processes, developing a second-in-command, and diversifying the customer relationships that currently run through one person.
How is my business valued for a buyout?
However the agreement says. That is the whole point of writing one, and the reason vague valuation clauses cause so much litigation.
The common methods are a fixed price the owners agree to update annually and rarely do; a formula, typically a multiple of earnings or EBITDA; an independent appraisal at the time of the trigger; or a hybrid, where a stale agreed value defaults to an appraisal. Each has a failure mode — a fixed price goes years out of date, and a formula written for one business climate can produce absurd results in another.
Two details matter more than the method. Say explicitly whether discounts for lack of control and lack of marketability apply; the difference is frequently 20 to 40 percent of the number. And specify who selects the appraiser and what happens if the parties disagree, because that fight is otherwise the first one you will have.
Does the Connelly decision mean my buy-sell is broken?
It means it should be reviewed, particularly if the company owns life insurance on the owners and the agreement calls for the company to redeem a deceased owner’s interest.
Connelly v. United States held unanimously in June 2024 that company-owned life insurance proceeds increase the company’s value for estate tax purposes, and that the obligation to redeem does not offset them. In the case itself, that produced a significantly larger estate tax bill than the family expected — on a St. Louis roofing and siding company.
Whether it matters to you depends on size. With a federal exclusion at $15 million per person, made permanent by the One Big Beautiful Bill Act, many family businesses will never owe estate tax and can leave the structure alone. For estates near or above that line, restructuring as a cross-purchase or through an insurance LLC is the standard response, and it is not difficult work.
What is key person insurance and do I need it?
A policy the company owns on someone whose loss would materially damage it — often an owner, sometimes a non-owner such as a lead salesperson or master craftsman. Proceeds go to the company to cover lost revenue, recruiting, and the cost of holding on while it recovers.
It is distinct from buy-sell funding, which pays to purchase an ownership interest. Many businesses need both, and lenders frequently require key person coverage as a condition of a loan.
Note the tax treatment: premiums are not deductible, and proceeds are generally income-tax free, but for a C corporation they can implicate the corporate alternative minimum tax, and after Connelly they affect the company’s value for estate tax purposes. Worth coordinating with your accountant rather than buying in isolation.
How do I keep my ex-son-in-law out of the business?
Transfer restrictions, applied to every owner including family members, plus a divorce trigger in the buy-sell.
The mechanics: prohibit transfers without consent; give the company and the other owners a right of first refusal; and make an owner’s divorce filing a trigger that permits the company to purchase any interest awarded to a spouse. Many agreements also require each owner’s spouse to sign a consent acknowledging the restrictions.
Do this before anyone is contemplating divorce. Restrictions adopted while a marriage is already failing invite an argument that they were adopted to defeat marital rights, which is exactly the fight you were trying to avoid.
My partner had a stroke and cannot work. What are my options?
Start with the documents. If the operating agreement defines disability and provides for a buyout or a removal from management, follow it precisely — those provisions almost always require written notice and a defined process, and skipping steps creates a defense.
If it is silent, the options are narrower. Your partner’s agent under a power of attorney can act if the document grants business authority. If there is no power of attorney, a guardianship or conservatorship proceeding may be necessary before anyone can act on their behalf — a public court process, and slow.
In the meantime, protect the company: document every decision you make, do not increase your own compensation without authority, and do not attempt to force a transfer. A surviving partner who acts unilaterally during a co-owner’s incapacity is the defendant in a great many breach of fiduciary duty cases.
Should my business interest be in my trust?
Usually yes, and it is one of the highest-value pieces of coordination between business and estate planning. An interest titled in a revocable trust avoids probate on death and allows your successor trustee to act during incapacity without a court order.
Two cautions. The operating agreement may prohibit transfers, including to your own trust, unless expressly permitted — so the agreement often has to be amended first. And an S corporation can only be held by certain trusts; the wrong one can terminate the S election, which is an expensive accident.
Also confirm the transfer was actually completed. A trust that was never funded with the business interest is the most common failure in this area, and it is discovered at exactly the wrong time. Assignment documents signed, records updated, membership certificates reissued if they exist.
How do I transition the business to my children?
Slowly, and in writing. The successful transitions I have seen share a pattern: the transfer of management authority happens years before the transfer of ownership, the successor runs the business with real authority while the founder is still available, and the financial arrangements are documented rather than assumed.
The structural tools are gifting on an annual schedule, sales on an installment note the business can service, voting and non-voting interests to separate control from economics, and valuation discounts for lack of control and marketability that make the transfers efficient.
The hardest part is not legal. It is deciding what the children who do not work in the business receive, and telling everyone the plan while you can still explain it yourself. Families that hear it from the founder generally accept it. Families that read it in a will after the funeral frequently litigate it.
What if my partner and I simply cannot work together anymore?
If the agreement has a buy-sell with a deadlock or forced-sale mechanism, use it. The most elegant is a shotgun clause: one owner names a price, and the other chooses whether to buy or sell at that price. It makes lowball offers self-defeating.
If there is no mechanism, the options are negotiation, mediation, or a judicial dissolution action — the last of which is expensive, public, and generally destroys the value both owners are fighting over. Missouri courts can dissolve a company, but that remedy is a demolition, not a division.
Practically, most of these resolve into one owner buying the other out. Getting there faster is almost entirely a function of whether a valuation method was agreed in advance. See business litigation if the dispute has already moved past the point of a negotiated exit.
How often should the plan be reviewed?
Every two to three years as a baseline, and immediately after any of these: a change in ownership, a substantial change in the company’s value, a divorce, a death, a serious health event, a major financing, or a change in tax law affecting the structure.
Fixed-price buy-sells in particular go stale fast. An agreed value set in 2015 and never updated is a real hazard — it will either grossly underpay a family or bankrupt a surviving owner, and either way it is enforceable.
Connelly and the permanent $15 million exclusion under the One Big Beautiful Bill Act are both recent enough that agreements drafted before 2024 were written against different assumptions. A review is a short engagement; a stale document is not.
What does this cost?
Less than most owners assume, and it is knowable in advance. A buy-sell agreement for a two-owner company, drafted rather than adapted from a form, is flat-fee work quoted before it starts. So is a coordinated package of business documents, powers of attorney and trust funding.
What is genuinely expensive is the alternative. Litigating a valuation dispute, a deadlock, or a claim by a deceased owner’s family routinely costs several times the price of the document that would have prevented it, and consumes the owners’ attention for a year or more while the business suffers.
The valuation and insurance components involve other professionals — an appraiser, your accountant, an insurance advisor. Coordinating them is part of the work, and it goes better when someone is holding the whole picture rather than each piece separately.
Ready to plan?
Answer the Monday question in writing.
Twenty minutes, no commitment. Bring who owns what, whatever agreement you signed when you started, and any insurance on the owners. You will leave knowing what your documents actually say will happen — which is frequently not what you were told.
Schedule a Free Consultation(314) 732-1547
Email derek@haakelawgroup.com · Offices in Wildwood, MO & St. Louis, MO (by appointment)
This page is general information about Missouri and federal law, not legal advice, and does not create an attorney-client relationship. Business succession and buy-sell structures carry tax and insurance consequences that should be reviewed with qualified tax and insurance professionals. Consult a licensed attorney about your situation.