Estate Planning for Entrepreneurs
There are many important issues involved in having a good estate plan in place, and those issues become more complicated if there is a business involved. As important as it is to have a proper will and power of attorney signed, it is also important to ensure that your affairs are set up so that, if something happens to you, those close to you know what to do with your business. Here are a few things to consider:
- Signing authority: If you have a corporation, is the bank account set up so that someone else other than you, that you trust, can sign for the business? It can often take time for the paperwork to get done to change signing authority if you are incapacitated or no longer living – having something in place now so that someone you trust can continue to sign cheques to pay bills, payroll, and other essential ongoing expenses is of key importance in ensuring business continuity.
- Business Operation: Who will run the business if you are not there? Everything from managing the cash, to managing employees, to managing sales and ongoing contracts, should be considered. It is a good idea to have a memorandum, or at least a discussion, with your spouse, partner, family friend or relative who would be your power of attorney or executor, as to how you would envisage the business continuing – who you would trust to carry out the tasks – and who would have the ability to carry out various functions.
- Sale or Termination: It may be that, if you are the sole employee, or the sole proprietor, of the business, your attorney or executor will have no choice but to shut the business down. That may entail selling off inventory, bringing in third parties to complete contracts, terminating or assigning a land lease, or other legal or accounting issues. Your thoughts ahead of time as to how that process would unfold is an important part of a good estate plan. Alternatively, there may be a good market for your business, and providing guidance ahead of time as to how your attorney or executor would go about selling off shares or assets is very important.
What I’ve set out above are just a few of the many issues that you as an entrepreneur must consider, in consultation with your lawyer, in preparing a good estate plan – and goes beyond just having a will and power of attorney in place.