Preparing for future events is critical for any business owner. That’s why it is essential that business owners and entrepreneurs create contingency plans in the case of incapacity or death.
Most small businesses revolve around one or two key owners. While they are alive and healthy, the business can thrive. But when they become unable to directly manage the business, the business tends to fail. Since your employees and family are depending on this business, it is wise to make plans that can be put into place immediately and keep the business alive.
Preparing for this eventuality includes a variety of essential legal documents. The most basic of which are core estate planning documents of wills, trusts, and powers of attorney. When prepared with your business in mind, the business can continue without you, albeit in a much impaired state. By empowering family, co-owners, and trusted employees, the business can get back on track to profitability.
An additional document that all business owners should have is a buy-sell agreement. This agreement is most useful in partnerships where one partner buys out the impaired partner using a predetermined valuation of the business. This provides much needed funds for your family while giving the remaining partner control over the business assets and activities. Even sole proprietors can use buy-sell agreements with others in the same industry.
In some cases, it may be wise to place the business ownership into a trust. Trusts are administered outside of the probate system. The probate system is public and the transfer of businesses through probate may mean publicly disclosing finances and assets. A trust could also be used to provide a revenue stream to heirs that don’t wish to work within the business directly while keeping the business available for those that do.
Owning and operating a business can be exciting and rewarding. Building the business is only half the equation. The business needs to be protected through skilled estate planning. An attorney with experience in these matters can suggest other documents or plans that could further protect your business for the future.