If you are a business owner, your business might be the
most valuable asset in your estate – and perhaps the most neglected.
Now, before you start sending me angry emails objecting to
my apparent suggestion that you’re a bad business owner and challenging me to a
hard-day’s-work competition, let me be clear: I assume that you’re doing
a good job in running your business. I’m confident that you work hard,
keep abreast of industry trends and developments, treat your employees and
customers well, excel in delivering a quality product or service, manage your
capital assets wisely – everything that qualifies as effectively working in
But how good are you at working on your business?
How much time and mental energy have you devoted to
maximizing its value and preparing for the day that, by choice or circumstance,
you’re no longer in the picture? Who would call the shots on Monday if you
passed away on Friday? Have you prepared an ownership and management succession
plan and groomed your successor?
Have you selected the proper form of business entity? Have
your legal structure and governing documents kept up with the growth and
changing nature of your company? Does your LLC’s operating agreement (or
corporation’s shareholder agreement) ensure a seamless transition to your
existing co-owners or to family members who inherit your business?
If all of these distasteful questions are making you feel
guilty and inadequate, know that you are not alone. The lack of effective
operating/shareholder agreements and effective succession planning is a common
situation, and the reasons (i.e., excuses) for not having them are as plentiful
as the owners who delayed them one day too long.
To ensure the company’s continuation, viability and value
retention after you are gone, ironclad ownership transfer and other documents
should be in place to reflect your specific desires in the event of death,
dissolution or other severance.
Whatever the sources of procrastination – preoccupation
with day-to-day business challenges, denial of an operating agreement’s
importance, poor relationships with co-owners, reluctance to face issues that
force you to confront your mortality, and so on – none of those causes measures
up to the devastation of having your thriving company lose its value because it
was not legally or operationally viable in your absence.
no short cuts
Ironically, the challenges of effective business and estate
planning have increased with the proliferation of planning tools at your
disposal. The temptation is great to take the bait of convenience and cost
savings offered by Web-based or off-the-shelf products and to assume that, after
you have filled in the required blanks and printed and signed the documents,
your business and estate planning is complete and you are free to move on to
less bothersome chores.
In so doing, you deprive yourself, your loved ones, your
employees and your customers of the thought, care and specificity that undergird
virtually all effective planning. Whatever your estate planning situation,
priorities and strategies, before you start cranking out your Trust-in-a-Box,
carefully consider the true nature of your estate and the steps that you want
your representatives, business successor and loved ones to take after your
departure from this earthly plane.
Do you have a complete and accurate picture of your
personal and business assets and liabilities, their value, and how they are
You might be clear as to who should receive what, but how
will you ensure a smooth transition of your assets to your intended recipients,
precisely at the time when your death has left them emotionally ill-prepared for
unnecessary bumps in the road?
You might also be clear as to how your affairs should be
managed in the event of your death or incapacity, but have you prepared an
“instruction manual” (beyond your Will or Trust) for your personal
representative or trustee and your second-in-command, and have you truly picked
the right person to fill those roles?
How are you providing for loved ones whose special needs
will long outlive you? And how will you continue to support, after your death,
the causes, ministries and charities that are so important to you now?
Ask for Help
If you concede that these are all good arguments in favor
of thoughtful, comprehensive planning but are convinced that, on your own, they
will remain unaddressed, ask for help.
An experienced business attorney can lead you through the
important questions that elude you, and that you could readily answer if only
someone will sit you down, focus your attention, and create a plan. Don't
underestimate the peace of mind that comes with having in place a plan that
honors your wishes, preserves your business for the next generation of
ownership, and ensures that your accumulated business and personal wealth will
continue to be a source of value long after you are through with it.