Planning Considerations for the Business Owner

Planning Considerations for the Business Owner article image

Planning Considerations for the Business Owner

My grandmother is going to be 92 this year. I’ve always known her to be a very private person, not wanting anyone, to include her children or grandchildren, to know of her affairs, including the status of her health, the assets she owns or her coveted spaghetti sauce recipe. This has been a sticking point for many years because our family is increasingly concerned with being prepared to help her as she ages or being prepared to settle matters at her passing.

I have come to learn that my grandmother is not an anomaly. Rather, she is part of a group of individuals who choose privacy to prevent burdening those closest to them. What is not considered in this act of “love” is the true burden that a lack of information creates. When a person becomes ill, loses capacity, or passes away, access to asset information is imperative to loved ones who step in to help. And while this is important for the most typical assets (bank accounts, life insurance, retirement accounts, etc.), this information is crucial when a business is involved.

For most, a business will continue even after the owner or founder has passed away. If others have not been made privy to the information or brought in to assist with the business, the family is often unsure about next steps and how the business will continue to operate. This especially becomes important when the family is dependent on the income from the business to make ends meet. To allow for the continuation of business operations, consider discussing and sharing the following information with your loved ones:

1) Where are the business accounts held and how do they function? This not only includes the institutions where the accounts may be, but also if there are multiple accounts and the information to access the accounts. You should also discuss if there are any other authorized signers on the account, whether there are any automatic transfers between accounts and a list of any auto-payments and details regarding the same.

2) Who has the documentation regarding the structure of the business, otherwise known as the corporate documents or binder? If another party, such as your accountant, is holding this information, make others aware of this and how the party holding the information can be reached if needed.

3) Who are the corporate officers? This can include a president, vice-president, treasurer, secretary, or any list of parties. More information regarding the businesses structure can often be found in the corporate documents themselves. These will be important parties if business resolutions need to be signed to allow for the continued operation, or in some cases, the sale of business.

4) Do your corporate documents outline what happens upon the passing of an owner? Especially with a multi-owner business, there may be special provisions that provide the other owners the first right to buy out the deceased owner’s share, prior to passing to any of the owner’s heirs.

5) Who are the other key players involved or who may have knowledge of the business? Accountants usually hold a lot of important information about the business and can often help with valuations.

6) Who or what (such as a Trust or LLC) holds the title to the business’s real estate? If this is separate from the business itself, ownership rights of the real property are important to understand to make sure that those administering the Trust or Estate can ensure that the title of the land properly passes or see that rent/ lease fees are paid.

While this list is not exhaustive, this information will provide a great start to those administering your Trust or Estate, as well as ensure that the business you have worked so hard for continues as seamlessly as possible. With the discussion begun, don’t forget to plan for your individual assets as well – maybe even the secret recipe you haven’t shared.