Life can be unpredictable and does not always turn out as we planned. Being prepared for a catastrophic event is vital to the sustainability of every business. It is important to prepare for the worst case scenario, thus allowing you to relax and plan for the best. To help you create a plan that addresses the needs of your business, Below is information on the key components that are crucial to have in place to ensure the long term stability of your company.
Consult a Professional
Consulting with a professional will guarantee that you will understand the options available to meet the unique needs of your business. Therefore we recommend that you consult with the following professionals: an attorney, an accountant, and an insurance agent.
In the unfortunate event of a death or disability, maintaining the financial stability of the business members is essential to the continuation of the business past the loss. We recommend requiring all members to have disability insurance, life insurance, and health insurance policies that are payable to the member’s families. This will provide financial security for the business members and their loved ones.
Every business should carry a life insurance policy on its owners. This will provide the partners/members/shareholders with the financial ability to purchase the business in the unfortunate circumstance of a death.
Prepare an Exit Strategy
It is important to have a plan in place that will allow the daily operations to continue if you are no longer able to participate in your business. The continuation of the company affects not only the owner’s family, but it also affects the job security of the employees. To protect your company, it is important to discuss possible third party options for ownership. Often times there are family members or employees that could step into your role in an emergency. Prepare that individual for this worst case scenario by speaking to them before an unplanned catastrophic event occurs.
In a partnership or corporation it is important to plan for the scenario that a partner/member/shareholder would want to leave the business. It is important to clearly define how the other owner(s) will buy out the individual and how the buyout will be financed. “Establishing the valuation process up front will avoid conflict at the time of the buyout” states Fred Meier.
It is important to develop a document that lists your company’s combinations, log in information, passwords, daily systems, and other key information that is required for the daily operation of your business to continue. Keep this document in a safe place and communicate with employees what is to be done on a temporary and permanent basis if an emergency were to occur.