If you are a small business owner, your focus is on keeping the company running on a daily basis. However, you also need to plan for how your business will survive if something unexpected happened to you.
Without a plan, your business is disrupted, which harms your customers, employees, and ultimately, your family
A business owner needs to focus on today, but what happens to your business if you can’t run it needs to be on the top of your to-do list.
Below are some tips on how to protect your business and make sure it stays on track and operating day-to-day in your absence.
Small Business Needs To Be Proactive
If you are the only owner of your business, then you need to have a clear plan on how the company will operate in your absence. Some things to consider:
- who makes the critical and day-to-day decisions,
- who can pay bills, write pay your employees, or take out a loan to if the business needs money, and
- what will ultimately happen to the business if you die?
If your business has several owners, then you must have a buy-sell agreement.
This contract outlines the agreed upon plan for the business should an owner become incapacitated or die. Provisions in the buy-sell agreement include:
- how the sale price for the business and an owner’s interest are determined,
- whether the remaining owners will have the option to buy the incapacitated or deceased member’s interest, and
- whether certain individuals can be blocked from participating in the business.
Have an Estate Plan
A will or a trust also lets you identify who will take charge of the assets and manage their disbursement (including your business accounts) according to your wishes.
A will can be used to pass assets at death, but a properly created and funded trust allows any assets owned by the trust to bypass the cumbersome probate process.
Your assets are passed to your heirs faster and may reduce the legal fees and estate taxes your heirs will owe.
Additionally, a trust can help your loved ones manage your trust assets if you become incapacitated.
While you are alive and well, you typically act as the trustee of the trust, so you can manage your business and assets with little change from the way you do now.
A trust allows your successor trustee to step in manage things if you become incapacitated.
This process avoids court involvement, allows for a smooth transition of trust management (which can be very important if your business is an asset of your trust), and proper continuing care for you in your time of need.
Although having a will can be a great way to start, most business owners are much better off with a trust-based estate plan.
Purchase Additional Insurance
Whether you own the business by yourself or are a co-owner, it is essential to have separate term life insurance and a disability policy that names your spouse and children as beneficiaries.
The money from these policies will help avoid financial hardship while the buyout procedures of the buy-sell agreement are being carried out.
Having a plan for your business in the event, you are unable to continue managing the company is essential to keep your business going.
An attorney can explain the many options you have to protect your enterprise so that you can focus on what you do best — running your company.