Future-proof Your Business
What happens to your business if you suddenly can’t run it?
You’ve probably spent years building your business. You know how everything works. You know your clients, your suppliers, your systems, your passwords, your processes, and all the little things that keep everything moving.
A lot of that knowledge probably lives in your head. So what happens if you lose capacity or die?
Your business still needs to operate. Bills need to be paid. Staff need to be paid. Clients need to be looked after. Contracts may need to be managed. Someone needs authority to make decisions.
That’s where business succession planning comes in.
Your estate plan should include your business
Estate planning isn’t only about what happens to your personal assets when you die.
If you own a business, your estate plan should also consider what happens to your business if you lose capacity or die.
The right strategy will depend on your business structure, your role in the business, your business partners, and what you want to happen in the future.
For example:
Who can make decisions if you can’t?
Who has authority to deal with the business?
What happens to your ownership interest if you die?
Do you want the business to continue?
Do you want your family to inherit it?
Is there someone who could realistically take over?
Would your business be better sold?
Do you have business partners who need to be considered?
What happens to your employees and clients?
Is there key-person insurance or other funding that needs to be considered?
Where is all the information someone would need to keep the business running?
These are succession planning questions, and they’re worth answering before something happens.
Your Will is only part of the picture
This is where business estate planning can get more complicated.
Your Will deals with assets that form part of your estate. It doesn’t automatically solve every issue involving a business.
The structure of your business matters. So do your governing documents, ownership arrangements, insurance, financing arrangements, and any agreements you have with business partners.
If you operate through a company, for example, you may need to consider both your role as a shareholder and your role as a director. A personal estate plan can’t simply be treated as a substitute for proper business contingency planning.
The same applies to partnerships, trusts, and other business structures.
What happens if you lose capacity?
This is an area business owners often overlook.
If you suddenly can’t make decisions for yourself, someone may need to step in to deal with your financial affairs. An Enduring Power of Attorney can form part of that planning, but the powers and structure need to be considered carefully in the context of your business.
There can also be limits to what an attorney can do in relation to a company or a person's role as a director. The business structure and governing documents need to be considered alongside the estate plan.
That’s why “I’ve got an EPA” isn’t necessarily the end of the conversation for a business owner.
What happens if you die?
This is where you need to think about the long-term plan.
Maybe you want your business to stay in the family. Maybe one of your children will eventually take over. Maybe your business partner should have the opportunity to buy your interest. Maybe you want the business sold and the proceeds passed to your beneficiaries. Or maybe the business is so dependent on you that the realistic plan is an orderly wind-up.
There isn’t one right answer.
The important thing is that you decide what you want to happen and put the appropriate arrangements in place. A good succession plan should also consider whether the person you have in mind is actually able and willing to take over.
Don’t leave your business plan in your head
One of the biggest risks for a business owner is having all the important information sitting with one person. If that person suddenly can’t work, the people left behind may have no idea where to start.
Consider documenting things like:
key contacts
business systems and processes
important contracts
suppliers
staff information
insurance
financial information
passwords and access arrangements
key client information
what needs to happen in an emergency
your long-term wishes for the business
This information can sit alongside your formal legal documents as part of a broader business succession plan.
Your business is part of your legacy
You’ve invested time, money, energy, and years of your life into building your business. Your estate plan should consider what happens to that investment if you can no longer be there to run it.
That might mean keeping the business in the family. It might mean protecting your business partners. It might mean creating a pathway for a sale. It might mean making sure someone can step in and keep things running while the longer-term plan is worked out.
The right plan depends on your business, your ownership structure, and what you want your legacy to look like.
If you own a business, your estate plan should include a conversation about what happens to it if you lose capacity or die.
And if your plan involves your accountant, financial planner, business adviser, or other professional, we can work with them to make sure the different pieces of the plan fit together.
Future-proofing your business starts with knowing what you want to happen when you’re no longer the person running it.