There has been a rise in entrepreneurial activity in recent years. After talking with many business owners, I thought I would focus on business protection suggestions, as a topic for this post.
If you own/operate a business, what steps have you taken to protect your business for you and/or your family? Pertaining to Business Matters – Are you Prepared? Let’s uncover some important issues for business owners to consider before consulting with legal, financial, tax professionals.
Have you considered what happens if the business owner/key decision makers are incapacitated?
In many small businesses today, the authority for making important decisions rests with a single person, such as the sole proprietor, sole shareholder of a corporation, or a member of a LLC. Often times governing documents do not address who would make decisions in the event this person is unable to do so.
Gruesome, I understand. Yet, if you or any key decision-makers were to become incapacitated, would the right people have the authority to keep the company running and make essential decisions during that period? Are those contingent decision-makers aware of the plans and are they prepared to assume a new role to lead the business forward as smoothly as possible? What about cash-flow? Does it continue to flow, if something happens to you/the owner? Have you considered the impact of this?
Several important planning tools are available, if this key person becomes incapacitated.
A limited power of attorney could be utilized to grant a key person the authority to make decisions and continue business operations. This type of document could be written so that it is limited in scope to allow the alternate decision-maker to act only if there is an event of incapacity.
Another option to consider is to establish an advisory committee to act in the event of key decision maker(s) incapacity. If your business has multiple executive level/key employees or multiple family members, this may be a solution for you. It is possible to structure decision making authority to named individuals to make key decisions by consensus.
It is also a possibility for a business owner to execute a specific document for use in the event of incapacity that transfers the business to a trust. This requires research in advance of local trust companies who have the business expertise and capacity to continue business operations on behalf of an owner.
Contingency planning in the event of the death of a business owner is an important element to formalize. Take note here that in many ways, this is similar to planning for retirement of a business owner. As business owners, we are advised to plan our exit strategy, as the business is formed. This is sound strategy that I find is rarely practiced. Be aware than an “exit” can occur in more ways than one.
As a business owner, take action with a sound mind to express your desires and clear intentions through a written plan. Planning, organizing and communicating is extremely important for you, your family, your business and your clients to convey peace of mind for all.
Contact me Lynn@thelivingplanner.com if I may assist you with this process.