We have all, at one time or another, thought about how we will look after those we leave behind once our lives end. But have you ever spared a thought for your business, sitting lonely in the back row, grieving over your loss?
While this might be a trite and slightly silly image, it brings up some serious issues. Who will look after your business if you die? Or if you become sick and unable to look after yourself? The issue becomes even more complicated when there are business partners or co-owners involved.
If your business partner suddenly became ill, would you be comfortable running your business in partnership with their spouse? Or children? Would their spouse or children even want anything to do with your business?
The way most people’s estates are set up, their share in any business they own is treated as part of their general assets, and bequeathed in accordance with their will to their partner/spouse or children, along with the family home and other assets. But what if you are the business partner that is left behind and you can’t work with the beneficiaries? They may not be interested in contributing, want to contribute too much, or just want to sell the business and you may not be able to afford to buy them out.
In a recent example, the founder of a successful small business passed away leaving a child working in the business and two other children. The other children decided that they wanted an active part in the operation of the business, which led to difficult discussions and decisions that affected the operation and value of the business. This could have been avoided if the founder had documented his wishes and discussed the situation with each of his children prior to his death.
We have also seen business partners and key employees leave a business with all the skills learned and contracts made to go to a competitor or start up their own business. Their actions and the relationships that they had built up with customers made it a difficult time for the business owner.
There are agreements and documentation you can enter into to protect yourself if these situations were to occur, and it can prevent a myriad of issues arising at a time that will already be stressful and painful due to the loss of someone close to you.
It’s important to discuss this with your accountant or lawyer BEFORE the need to arises.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.