The Mistake of a Business Owner Regarding Failing to Plan for Incapacity, Incompetency and Death
It is not uncommon for a business owner to forget or avoid planning for incapacity, incompetency and death. While trying to juggle several balls in the air at once and having to wear multiple hats every day it is easy to avoid planning for incapacity, incompetency and death as a business owner. Unfortunately, by doing so, it is extremely likely that your business will fail if you become incapacitated, incompetent or dead.
Hypothetical: Sally owns Sally’s Best Brownies, Inc. She is the sole owner of the business and has been for 25 years. She has five employees, including her daughter, Sabrina. While coming home from work one day, Sally gets into a car accident and is in a coma.
Analysis Fact Pattern #1: Sally has a power of attorney that names Sabrina as her power of attorney for her business. Sabrina is able to step into Sally’s shoes and continue to run the business in Sally’s place until Sally recovers.
Analysis Fact Pattern #2: Sally does not have a power of attorney. However, she has named Sabrina as an authorized user on the business account. The downside to this is that Sabrina’s authority is only limited to the bank account in which she is named as an authorized user.
Hypothetical: Sally owns Sally’s Best Brownies, Inc. She is the sole owner of the business and has been for 25 years. She has five employees, including her daughter, Sabrina. While coming home from work one day, Sally gets into a car accident and she dies.
Analysis Fact Pattern #1: Sally’s power of attorney is no longer valid and useable since she died.
Analysis Fact Pattern #2: Sabrina as the authorized user on the bank account can make certain that checks are signed and deposited.
Analysis Fact Pattern #3: Sally had not completed any business succession planning. As a result, Sally’s estate will have to be probated. The business will most likely encounter difficulties until a personal representative is provided letters by the probate court. That is because no one is authorized until then to sign contracts, etc. on behalf of the business.
Analysis Fact Pattern #4: Sally had completed her business succession planning. As a result of her planning, her shares automatically transferred to Sabrina upon Sally’s death and Sally’s Best Brownies, Inc. continues to thrive even though the original owner passed away.
Spangler and de Stefano, PLLP assists business owners with trusts, wills, health care directives, power of attorneys and business succession planning.
The material contained herein is for informational purposes only, and is not intended to create or constitute an attorney-client relationship between Spangler and de Stefano, PLLP and the reader. The information contained herein is not offered as legal advice and should not be construed as legal advice.