Small business owners adapt daily to the changing needs of their companies. However, often the companies are not prepared to adapt to the owners’ changing health needs. These companies do have a plan for an owner’s incapacitation or, in the worst case, death. Here are a few simple things to keep the company nimble during times of absence or loss.
- Give Limited Power of Attorney to a Co-Owner or Trusted Manager. Power of Attorney permits an individual of your choosing to administer certain assets and funds during an episode of incapacitation. This permits the company to pay its bills on time and make timely investments. The bank, buyer, or lender may forestall critical business transactions if there is no legally-authorized decision-maker steering the business.
- Consider a Buy-Sell Agreement. This agreement works well when heirs are uninterested or not well-suited to take ownership of a company. It also permits for quick transfer of business interest to a trusted manager or co-owner who wants a greater ownership interest in the company. The agreement obligates remaining owners or a manager to purchase the decedent’s ownership interest at death. This agreement can provide the family with liquid assets for a college education, home, or the like.
- Establish an Advisory Committee. This is a body of people within the company that are interested and trustworthy who will make decisions at any time a principal owner is incapacitated. The powers of the committee may extend to legal decisions as well. Since litigation generally requires adherence to court-imposed deadlines, an advisory committee with the legal capacity to represent the company can be an asset if the company is engaged in a lawsuit.
There are numerous back-up plans that suit particular businesses situations. They are usually based on the business’ structure and personnel. To learn more about business planning in the event of accident, illness, or disability, feel free to contact us at (626) 696-3145.
