In part one, we talked about estate planning for the sole business owner. If you have partners in the business, the issues are a bit different. The immediate issue of continuing the business operations is not as much of a problem if you have partners. There are many other issues that need to be addressed when a business is owned by more than one individual, even if those individuals are family members.
The issues you should think about include the following:
- How long should your paycheck or draw continue if you are disabled and cannot work? Do you have sufficient disability insurance to protect you and the company? How will your role be filled? Is your disability permanent or temporary? How do you and your partners decide whether your disability is permanent or temporary?
- Who should be your agent when the company is making decisions? If you are on the Board of Directors or are a manager or managing partner, who will step in? Who will protect your interests? This is a decision to be made by all partners ahead of time. Generally, your agent under your power of attorney can vote your stock, but if you have a minority interest, this may not be sufficient for protection of your interest in the long run.
- If you become incapacitated over a period of time, such as is the case with many neurological diseases, who should decide when it is time for you to stop working? Is there a mechanism that would be fair to all involved?
- Have you decided how the company interests will be valued?
- Should your interest be purchased at the time of your disability? If so, what type of liquidity will the company have to purchase your interest?
Death: What would happen to the business if you die?
- Do you have an agreement with your partners and the company?
- If the company is going to buy out your interest, how will it be paid? Is there life insurance to finance any buy out? Have you considered whether that insurance should be owned by the company or by the other owners?
- If your interest is not going to be purchased, how will your beneficiaries' interest be protected? Will your estate's beneficiaries have the opportunity to participate in management and/or employment?
- What are the company's prospects if you are no longer alive? Do you want the business to be sold or maintained? What do your partners think?
If you own a business with someone else, you should address the issues of what should happen in case one of the business owners dies or is disabled. Your agreements should be in writing. In addition, the plan should be reviewed every few years, as the business value and dynamics change. This is one of the most difficult processes for owners of a business to go through, but if a disaster happens, having a plan will help to maintain the value of the business and the relationships of the business owners and their family members after such an event.