Business Owner Incapacity Planning
Passing Along a Benefit, Not a Burden
Why is incapacity planning for business owners an indispensable component of your business and estate plan? Most business owners have their estate planning prepared because they are worried about what will happen to their business after they are dead. However, have you ever thought about what would happen to your business if you became incapacitated? I’m sure you would prefer to be passing along a benefit to you employees, not a burden, right? So, you need a plan for how your business functions if you need to be away for an extended period of time. Proper estate planning includes the benefit of creating a plan for covering extended absences by a business owner.
The Importance of a Plan
As the owner, you are responsible for the day-to-day operations of your business. This is a full-time responsibility. But what will happen if you can’t be there all the time? You don’t necessarily have to be in a coma to be unable to participate in your business. You could be on an extended vacation with your family. Or, you receive a medical diagnosis that requires you to take several months away for treatment or recovery. Perhaps you are dealing with the loss of loved one. During this time, your business needs to continue on so that you and your employees can continue to take home money.
So, you need a plan in place now before you are away from your business for an extended period of time. If you do not already have a plan, get one done now!
Who Will Be In Charge
It is important to think ahead about who will be in charge of the day-to-day operations. Why? Because a ship without a captain can be dangerous. This individual need to understand the business. He or she needs to have the respect of your employees. And, she or she must be confident in making tough decisions in your absence. Without this planning, everyone could jump to the conclusion that he or she is in charge. Alternatively, no one will step up to take on the leadership role. Either way, chaos ensues.
Who out there thinks chaos is good for a business? I’m pretty confident no one has their hand raised. At least I hope not!
Why Chaos is Bad for Business
When a business is in chaos, finances plummet. Morale decreases. Orders are not processed quickly and efficiently. Employees may leave. More importantly, your Customers will find another better run business to handle their affairs.
No customers? Then no revenue. If no revenue? Then no money to pay for employees. No employees? Then your business cannot operate. All of these equal no business. See how chaos is bad for business?
So, you need a plan to alleviate chaos when you are incapacitated. A plan is crucial for your business to survive.
The Family Member Plan
Perhaps you have family members working in the business. You are thinking “But I have family members in the business. They will handle the business if I am not there. So, I’m good, right?” Maybe, maybe not.
If you have family members working in your business, it is important to explain to them what will happen in your absence. Your family members need to know who will be in charge. You do not want someone assuming that they are in charge just because they are family. Importantly, remember that just because your family is involved with your business does not mean that he or she is the best choice to succeed you.
If you are going with the family member option, you need to have a plan. You need to plan which family member will be in charge. You need to plan how that family member will run the business in your absence. Your family member needs to understand how the business operates. He or she needs to know how to manage employees. Most importantly, he or she needs to learn great customer and relationship building skills.
Key Plan Components
So, now you are wondering, what are some of the items my plan needs. Here is a list of things to consider including in your planning for potential incapacity if you are a business owner.
- Buy-Sell Agreement;
- Durable Power of Attorney;
- Business Plan;
- Management Training;
- Business Succession Planning
We can help you develop a plan to keep your business running while you are away. From choosing the right individual to putting processes in place for your incapacity, we are here to help.