What Will Happen to Your Business When You Die?
Every business needs someone in charge in order to succeed. The business may be a sole proprietorship with a single person making all decisions or it may be run by a team of leaders. The loss of an owner or key decision maker can always create complications for a business. But, if the business leadership team consists of only one or two people, the unexpected loss of one of these individuals can be devastating. A business worth millions could turn into a business worth little or nothing almost overnight.
While true business succession or exit planning can take time, an accident or a quick and sudden illness may take away the ability to plan or to allow a plan to come to completion. Therefore, the business owner should nominate, in her estate planning documents, the person or persons she would like to place in charge decisions related to the business during any period of transition related to her inability to continue to serve. A reasonable amount of life insurance should also be in place to provide liquidity that may be necessary during the transition period and pay any required buyout of the deceased owner’s estate.
In addition to life insurance and properly drafted estate planning documents for the owners, it is vital for every business to have in place “Business Continuity Instructions.” Business Continuity Instructions give a quick overview of your recommendations as the leader of the business to those who are left to take care of the business when you no longer can. While this transition period is never easy, it can be made much smoother with well thought out Business Continuity Instructions.
The Business Continuity Instructions should:
Identify individuals who in the event of your untimely death or incapacity can be given responsibility to:
supervise business operations;
financial decisions; and
internal administration
Identify whether the business should be sold to:
a third party;
a key employee;
or family member
Identify individuals or companies who may be interested in purchasing the company.
Provide guidance on how to access crucial information
Identify which professional advisors should be consulted
Coupled with a solid estate plan and adequate life insurance, Business Continuity Instructions can be the difference between the continued success of the business on one hand or a forced liquidation on the other.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.