In some ways, this business is your baby! You have watched it be born, nurtured it through the scrapes and bruises, educated and enlightened it, and helped it mature into something you are really proud of. But just like your human babies, your business needs to become independent from you so that when you no longer want to put in the thankless long hours, it will continue to grow, evolve and thrive!
Here are some questions you need to ask yourself, and some common solutions that you may want to consider:
If you are sick for two weeks, who will be there to pay the bills, order the supplies, and deal with customers? That one is probably an easy one as you hopefully have a second-in-command who has the power to write checks and deal with the day-to-day operations. If you don’t have that power already delegated, you should consider designating a person to have A Limited Power of Attorney. This document will allow that person to do those things, and only those things, that you need him/her to do in your absence.
But what about if you need to exit the business totally for health or emergency reasons? Some business owners are lucky enough to have their children involved in the business with them. But how do you keep control of the business during your life, and seamlessly turn it over to them once you have passed? You may want to consider putting your business ownership interest in a Trust. In a Revocable Living Trust, your business profits could still be used to support you during your life even if you are incapable of returning to the business. Then when you pass away, the ownership would be passed on to the children involved in the business. If these are fewer than all of your children, you may want to divert other assets to the non-business children to even things out.
What if you have no family involved in the business? The business could take out a life insurance policy on your life that the business would use to buy out your share of the business upon your death. This is helpful if you have non-related business partners. Or your family could try to sell the business if there is no one involved in the business capable of buying your interest. In this case, it would be helpful to your family for you consult with a business broker while you are still alive so that you know and can inform them of the sales process to be undertaken upon your death. In your Will, you could give direction to your Personal Representative about how you anticipate the sale of the business on behalf of your estate.
In any event, if you are a small business owner, you need to have an exit plan in place (business succession planning), just like we, as people, need to have an exit plan in place in the form of an Estate Plan. Ideally, these two plans, both personal and business, will have been thought out and designed together to maximize the health and continued vitality of your biggest baby – your business – after you are gone.