Proper Business Protection and Succession Planning 

A succession plan is much more than just an idea of who will run the company when you are not able or no longer want to.  A Plethora of factors come into play: Will you sell? To whom? Will your family take over? How will the business continue to operate? What happens to your family, employees, and the company after you pass away or incapacity?  

While there is myriad of insurance solutions to protect your business from lawsuits and other liabilities, one liability that simply cannot be avoided is incapacity or death.  This is especially true if you are the sole business owner; without proper planning it will be incredibly difficult to make certain your business and the income it generates to your family will continue to run smoothly.  A comprehensive estate plan will allow you to avoid unnecessary court processes, which could easily cause the loss of everything you worked so hard to build.

A will alone is not enough to achieve these objectives.  While it is possible to leave your company to someone in your will, it certainly is not ideal since it will not avoid probate.  Probate can take months or even years to complete, which can severely disrupt your business and its ability to generate cash flow.  Not to mention it is in the courts hands to decide the fate of your business.  Due to the public nature of probate, it can expose the internal affairs and trade secrets to your competitors.  Furthermore, a will only goes into effect upon your death, so it would not help protect your business should you become incapacitated by illness or injury.  If a will was only in place in the event of your incapacity your family would have to petition the court for guardianship to manage the business and other personal and financial affairs.  There is no guarantee that the court appointed individual will be the best person to run your company.

A revocable living trust is an efficient way of providing maximum protection for your business and family to ensure the continued success of your business.  A revocable living trust avoids probate since all assets placed within the trust are immediately transferred in the event of your death or incapacity to the appropriate party or parties of your choice.  Having your business held in a trust will allow for a smooth transition of power.  A trust allows for legally binding specific instructions, which act as a succession plan if you were to become temporarily or permanently incapacitated or in the event of your demise.  Since you can list the individual/s that you think is best suited to run your business in your absence or requirements on how the business should operate, it is a perfect vehicle to utilize for succession planning. 

If your business has one or more owners you may want to consider establishing an agreement that upon the death of any owner, their interest is automatically purchased by the other owner.  This is known as a buy-sell agreement, which will ensure that the beneficiaries of the deceased owner including spouses or family members do not unintentionally become owners.  A common method to fund buy-sell agreements are through life insurance policies, which can be held directly in an irrevocable trust.  These policies will provide immediate liquidity to your family or business partners upon your demise.  While most business owners will get suitable protection for their business using a revocable living trust, for a bulletproof form of asset protection you will want to consider creating a specialized irrevocable trust.   

While placing your business in a trust is an effective way to protect your company upon your death or incapacity, it is merely one part of a comprehensive asset protection plan.  To get the maximum level of protection, we must analyze your business and its assets to determine the tools available to ensure your company and wealth will not only survive, but continue to thrive.  It is paramount to make sure your business is not vulnerable to the next downturn; having a portfolio that includes a mix of assets outside of your business that can be used when liquidity is vital.  We welcome the opportunity to review your portfolio and estate planning documents to make sure the appropriate plan is in place to meet your needs and desires.