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Legal Issues

Estate Planning for the Business Owner - Part One - September 28, 2011

If you are the sole owner of your business, you need to think about what would happen to that business if you die or become disabled. Some of the issues you should think about include the following:

  • Disability:  Who would be in charge of your business operations if you become disabled and cannot do it? 
    • Is there someone authorized to pay bills, deposit checks and make financial decisions?  If your business is operated as a corporation, limited liability company or other entity, your power of attorney will not give anyone that authority.  The authority must be granted by the entity, not by you personally.  It is best if this is set up before you become disabled.
    • Are you the only person who is authorized to act on behalf of your company?  If you are the sole director or sole manager, you may want to consider naming at least one more director and/or managers, or name your successors in your corporate or company legal documents. 
    • Have any of these decisions been set out in writing to the satisfaction of your financial institutions?
    • Have you designated a business advisor who may be able to assist with the business if you are unavailable?
    • Where are your business legal and financial records?  Is there someone who knows their location, whether electronic or paper based?  Do they know your passwords or know how to retrieve them? 
  • Death:  What would happen to the business if you die?
    • Does the Executor of your Will have sufficient authority to continue to run the business without obtaining court approval?
    • Do you want the business to be sold or maintained?  
    • If you want the business to be maintained by your family, who would continue to operate the business?  Is there sufficient life insurance to take care of the business and your family after your death?
    • If you want the business to be sold, who should be authorized to operate the business during the process?  Have you told anyone the identity of potential buyers?
  • Recommendation:  It is good to have a written plan for the continuity of a business upon the death or disability of the business owner.  It is best to have that written plan in your corporate or company legal documents, with copies sent to those people who will need to act if you die or become disabled.