What would happen to your business if you became incapacitated?
This is an issue that confronts any business owner, even me running my own law firm. I was actually asked this very question by my mother, she wanted to know what would happen to my clients, what would happen to my business if something happened to me? So it's not only law firms who have clients who have to deal with this issue, but it's really any business owner, especially one who founds a company and is really integral to the day-to-day workings of the business.
So there are three main areas you want to consider when you look at a business succession plan that would deal with incapacity:
- The first is going to be Who's going to manage the finances? Chances are you've been managing the finances for the business as it grows. You probably have an accountant to work with. But if something happens to you, you need somebody who is empowered to make financial decisions to keep the business running. Most people think it's not a problem, somebody will be able to step in. The question is, who should it be? You may think that everyone will turn to your right-hand man or woman and be the person they talk to. But that might be not what happens. Maybe people have to go to court and have a receiver appointed to run the business. Rather than take that chance, you can use a business succession plan with an incapacity plan to lay out who would be able to make the financial decisions for your company.
- The second area to consider is Who's going to do your job? Founders tend to be very involved in the business, they might have four or five different skill sets. They're the person doing a lot of the work, but if they get sick, and then they're unable to do the work, who's going to do that work? Chances are, there's not one person who can handle all of your duties, but maybe three or four, maybe five who can step in. By having a business succession plan, you can designate who's going to do what jobs so that the business can function, and those things get done if you're unable to do them.
- The third area to consider is Will the business have enough money in the long term? This becomes especially important if you die and the business is left trying to figure out where money is going to come from. When dealing with very important people involved in the business, often partners and owners, they will often have key-person disability insurance. That is an insurance policy that's tied to those owners so that if they become incapacitated or they die, the business essentially collects on the policy and can use those proceeds to help the business keep running.
There are two different ways you can create a plan for your incapacity. One is you could try to do it yourself. Hope you've done it, right. Maybe leave it on a notecard in the back of your notebook. Maybe leave it somewhere in your desk.
But the second way, the better way is to work with professionals your financial advisor, your accountant, your attorney, they're all there to help you put together these kinds of plans. You don't want to leave your business without a plan in case something happens. You never know what's going to happen when you step outside. You could be hit by a car, something strange you've never thought of could happen. So make sure you have a plan for it.
Time to create a business succession plan for your business, or review what you've currently got in place? Let's set up a complimentary Legal Strategy Session to discuss the best options for you and your business.