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
Recommendation: 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.