It’s something you may hear casually thrown about at the office, or maybe something you even say it to yourself after you barely avoid an accident on your way to work—I need a will. And while everyone needs a will, small business owners have very special needs that they themselves may not even realize.
Your business, and the value you have built into it, is the greatest asset you can preserve for your heirs. Surprisingly, many business owners do not have a clear plan of action for how to protect that asset if they should suddenly be “out of the picture.”
First of all, every business owner should incorporate their business into some form of filing entity (corporation, limited liability company, limited partnership, etc.).
Second, every business owner should have a written agreement which controls the governance of their company. This is especially true if there is more than one equity owner, but still prudent even if owned by a single individual.
Finally, every business owner should have a will which acknowledges and cooperates with the written agreement that controls the business. Nothing is more frustrating than having to litigate two documents which conflict with each other after the person who signed them is long gone.
When creating these documents you should contemplate the following questions:
- Who will run the business after I am deceased?
- Who will own the business after I am deceased?
- How will the above transfers take place?
- Will my business have enough capital to survive the transfer?
- Should I integrate life insurance into my business planning?
- How will this affect my business partners (if any)?
- How will this affect my creditors (loans, lines of credit, etc.)?
Having a defined and well thought out plan, will make a difficult time easier for those you leave behind. Additionally, the plan will also give you a plan should you suddenly be disabled or otherwise unable to maintain your previous duties, and can also serve as a jumping off point for a retirement plan. And as all good business plans, they should be made with the advice of financial and legal professionals with very careful consideration given to continued smooth operations. At the Vethan Law Firm, P.C. , we work with business owners and financial planning professionals to help them protect and preserve what they’ve built. We assist business owners with choosing the best corporate form for their business, drafting the written agreements that outline and describe management of the business, and work with or recommend financial planning professionals to help ensure the final plan is effective and accomplishes the business owner’s goals.