For Advisors

Your client asks about funding the buy-sell, and the honest answer is that nobody in your office has the hours to learn it properly. The capacity ceiling is arithmetic, not a shortfall in ambition. Here is where it sits in a small firm and the three ways firms respond.

The 706 ties. The valuation holds. And the estate owes roughly $9 million in nine months with $1.8 million in marketable securities to pay it. Liquidity sits just past the edge of the engagement, and the tools that cover it need to be in place before the file opens.

Software is absorbing more of the return every year. What it cannot absorb is the eleven-year relationship, the annual permission to talk about money, and the first call when something changes. That relationship only holds if it shows up where your client's decisions are made.

His compensation is on the W-2. His truck is on the depreciation schedule. Nothing in the financial statements records that if he doesn't come back Monday, a third of the revenue leaves with him. Key person exposure is the largest unrecorded item in most closely-held books — and one IRS form is where it meets your engagement.

Most owners who say succession is handled mean they have thought about it, named someone, or signed something years ago. Seven checks run against documents already in your file will tell you which one it is — before a trigger event answers the question for everybody.

The agreement exists, the attorney did good work, and the obligation is enforceable. Whether a dollar sits behind it is a separate question, and after Connelly the way it is funded is a tax question too. Here is what the return can tell you, and what it cannot.

The return is right. Every number ties. And nothing in that engagement asks whether the buy-sell in your client's binder has a dollar behind it. The boundary between compliance and planning is structural, not a gap in your work. Here is what sits past it, and the three ways firms answer.