The Mistake of a Business Owner Regarding Failing to Plan
Life can change in a split second. An unexpected heart attack. A serious car accident. A fire. A natural disaster. Cognitive impairment. Those are all examples that happen every day. We like to believe it isn’t a reality for any of us. Until it is. With the every day issues that come up in a business owner’s life, where sometimes we feel overwhelmed, it is difficult to make planning for natural disasters, “acts of God,” incapacity or incompetency, or death a priority. It is important to make it a priority. Doing so, will give you, your family and your employees piece of mind.
We uniquely understand the pressures, the challenges, the obstacles, and the rewards of being a business owner. We are also business owners. Being proactive and having a plan in place in the event that something bad happens is prudent.
Planning starts with the foundation of your business. Your foundation is your legal entity (or your sole proprietorship if you have not established a legal entity, such as a limited liability company (LLC) or a corporation). The ownership of the business needs to be documented properly. The documentation of ownership is completed through company documents, such as membership certificates for an LLC. It is important that the agreements of the owners as to ownership are in writing. That is because the new LLC law allows oral agreements. Oral agreements generally are bad. That is because the agreement will need to be determined through litigation if there is a dispute. It is also important that your company documents match your tax returns. In other words, if your tax returns show a different ownership than your company documents you have a problem. In a time of high stress, such as an unexpected health issue, having an ownership dispute will not only most likely have a negative impact on your health, but it can cause employee moral issues, difficulty retaining employees, and a loss of customers as a few examples.
Also important is the signer on your business checking account. If you are the only signer on your business checking account, and you do not have a power of attorney naming an attorney-in-fact to step into your shoes in the event of incapacity/incompetency, your business will not be able to be maintained.
An additional part of planning is making certain that you have an estate plan in order as well as the completion of business succession planning. If you have more than one business owner, do you have a buy-sell agreement in place? If you have a buy-sell agreement in place, have your funded that agreement with life insurance? Does your estate plan align with your business goals? If your business space from a building that you own personally or that you do not have a written lease, how is your business going to continue to function if something happens to you?
Spangler and de Stefano, PLLP assists business owners with helping business owners plan for the unexpected so that you have peace of mind.
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.