Little thought is given to the future of the company in the event that the business head dies. It’s an unsettling and a deeply emotional situation that can push any business into jeopardy if the business owner did not make proper preparations. In the case of small businesses, it is assumed that the next kin or a business partner will take over. But it’s not as easy as it sounds. The whole dynamics of the organization may collapse without much planning. This will not only impact the employees, the survival of the business, and also the family that will be left behind. To make sure that everything will still run smoothly despite your absence, here’s what you need to do.
Ensure an Estate Plan
A business-owner shouldn’t wait for his retirement to prepare an estate plan. This should include a business succession plan. It will identify if the business-owner is open to a buy/sell agreement with a business partner or selling to a third-party buyer. The plan could also be a way to ensure a succession power to a current employee or family member. A buy and sell agreement creates an obligation on the company or other owners to purchase business interests upon death of the business owner.
If there’s no immediate successor to take over operations, the ownership units can be placed in a trust at the owner’s death and the trustee will continue the business operations. The trustee could also appoint an advisory team with key business players and trusted advisors and advise him regarding business decisions.
The owner should make sure that the lawyer who will take care of all the legal bases understands the family dynamic and will create a plan to fit that dynamic. An estate plan must consider all of the players and assets or litigation or estate loss may occur.
Meet Your Financial Obligations
Acquiring credit insurance will secure your future business plans. This will cover your insured loan balance, taking off additional financial burden to your estate or business.
Buy a Life Insurance Policy
Typically, the benefit from life insurance pays off most of the financial obligations the come with the death of a business owner. It exists to secure the future of the business from the unexpected. Life insurance can provide the cash to cover sums of tax bills, implementation of a buy and sell agreement, and other anticipated expenses.
Even if business is booming, business owners should always be ready for the worst. When building your business, you do not only consider the success of it within a limited timeframe. You must secure its longevity even after you’re long gone. Smart and early planning will protect your investment and the business you worked hard to build.