It is important to distinguish between a business succession plan and an estate plan because you must have both of these plans in place to ensure the continuity of your business and to ensure that everything that you have worked for basically remains intact.
An example scenario
Let's say you have three people who are in business together, and one person dies. Unless there is a clear estate plan and a clear business plan, the two surviving business owners may end up being in business with the spouse of the decedent. If he or she has a will, you could end up being in business with family members of the decedent.
In order to allow a clean and even break, the first important component of business planning is to have the business evaluated. Then, you should ensure that it is clear that there's an equitable distribution of the value of the business.
A clear succession plan
With a clear succession plan, which can be financed by what we call “Cross-Purchase Agreements," each person should be taking out insurance policies on the others. So when one person dies, that money, the value of their share, is paid to the estate of the deceased partner, and the business continues on. There's no litigation, and there's no disruption.
You have a plan to buy out the survivor's share of the business. You maintain the business and run on. The business succession plan is a plan where a component of that plan ensures that there's a way to buy out the deceased partner's interests so that the business can continue on.