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Small business owners must prepare for the inevitable

On Behalf of | Nov 2, 2016 | Estate Planning |

Your family has come to enjoy the finer things in life, and that is all thanks to your hard work. You have built your company from the ground up and now you are getting to enjoy doing the things you have always wanted to do. Even though things seem great right now, you should stop and think about what is going to happen if you die unexpectedly.

Be honest. You are at the helm of your company. Decisions that have to be made, especially the big ones, fall on your shoulders. You might have a staff that can handle things for a week or two while you are on vacation, but your phone or computer is probably always on. The thought of having to handle a problem from afar is probably floating around in your mind. If you aren’t there to handle things, the company would probably enter a downward spiral.

Small business owners aren’t superhuman. Just like anyone else, you will die one day. You don’t know when that day will come, so it is best to begin to prepare for it now. You wouldn’t want the business to crumble and your family to lose the income while everyone is dealing with the news of your death.

What is needed to protect the business and your successor?

The exact documents and forms that are needed to protect the business and your successor vary based on the type of business that you have. For example, if the owner of a sole proprietorship dies, the business technically dies with him or her. A person who takes over the business when the business owner dies is probably going to be liable for your debts. With this in mind, you should learn about what legal options you have to protect your business and the person who runs the operation when you are gone.

Where’s the money going to come from?

You will need to check your life insurance policies and other documents to ensure that you have everything handled properly to make the transition as smooth as possible. You need to know how much the business needs to continue operating. You need to know how much the business or your family would have to pay on loans and other financial agreements. You need to determine if you have the insurance coverage to cover all of these expenses.

If you are going to need someone to cover your position until a permanent replacement is found, you should consider getting a “key man” policy. A key man policy is one that will be used to pay the salary of that replacement person. You should make sure that it is equal to the full salary that would be expected for one full year in that position.

Who is going to fill your shoes?

After you are gone, is someone in your family going to take control of the business? Will employees take over? You need to make these plans today so that there is a clear line of ownership and control when you are gone.

If a member of your family is going to take the helm, you need to make sure he or she is ready and willing. The individual also must be able, which means he or she needs a good understanding of what your company does, how you handle things, and what must be done to keep the business moving in the right direction.

If your employees are going to get the company when you are gone, you will have to make sure that your family is taken care of financially. You probably don’t want your family to have to deal with a sudden financial shock of finding out that they don’t have any income because you simply handed the company off to the employees the second you died.

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