PERSONAL POSITION PLANNING FOR BUSINESS OWNERS

What happens if you are not in your business unexpectedly for a period of time or forever?

While talking about personal illness or death can be uncomfortable, it is important you have a plan for your unexpected absence – for the business and for your family.

Planning for your unexpected absence or death is good management. It demonstrates respect and care for your business and your family.

PARTNERSHIP STATUS

If your business is owned through a partnership of friends, family or business associates, ensure the partnership terms are properly documented including what happens should one partner become incapacitated, wish to leave or die.

While a partnership agreement ought to be established at the time of entering into the partnership, it can be created at any time in the life of the partnership by agreement of all partners.=

The agreement could be a simple document or something drawn up by a lawyer. The keys are that it represents an agreed documentation of responsibilities, financial commitment, exit planning and handling of death.

BUSINESS PROTECTION

Should you wind up in hospital, be stuck somewhere while travelling and unable to return for some time or die unexpectedly, those running the business need a short term plan – to keep things on track.

While a well run business will have people allocated responsibilities to ensure this, it is worthwhile having a plan drawn up to give people guidance on how to handle the situation, what to do, what to say and things that need to be done to keep the business ticking along even in the most difficult of circumstances.

Our advice is: have an envelope or a file with simple instructions covering each contingency you feel comfortable preparing for. The file could have personal notes for people too. From a business perspective, giving specific guidance on activities that keen the business moving forward in difficult or tragic circumstances is vital to the protection of the asset.

SUCCESSION PLANNING

Make sure people know through your notes and will your wishes around succession planning. However, this should be obvious from hiring, training and management moves you have made.

The most important activity of any leader in any organisation is to train their replacement.

FAMILY DISPUTES

Family businesses have unique challenges. It is important to confront these and work through them while you are around. A family dispute among people working in the business swept under the carpet is a dispute ready to explode in the event of tragedy or extended absence of the leader of the business.

Communication is especially key to family businesses. Everyone needs to understand their roles. Roles need positions descriptions and fair compensation. Without these, the situation can turn against the business in the event of death or extended absence.

A partnership agreement is useful even in family businesses.

YOUR WILL

Legal advice in Australian is that wills are updated every two to three years. While it suits lawyers to want you to spend money with their profession, the reality is there is case law indicating the older the will the easier it is for it to be contested. A more recent will is less likely to be contested – at least on the grounds that it does not reflect your recent wishes.

It is important to be specific in your will about business assets. Allowing your business ownership or a share of ownership to be dealt with as part of your overall assets puts complete control in the hands of your executors.  We suggest you taking time to document specifically in your will matters dealing with your business ownership.

No one wants to plan for disaster. It’s a negative activity, easily put off for more happy and optimistic pursuits. The reality is that most business owners will confront some form of disaster at some point in their business life. This advice is far-reaching, designed to act as a broad list of steps you can undertake to be prepared. Do it all or some, but do something … otherwise when you need good planning you will not have a plan on which to fall back.

Disaster planning is vital for any business.  Too often, the need for good disaster planning is realised after a disaster has hit the business.  This advice sheet offers business and computer related advice which is designed to mitigate the impact of a disaster on your business.

POWER OF ATTORNEY

This is a legal document that allows others to act in your stead. It is important that any such Power of Attorney is written in line with your will.  It would be important in smooth management of your obligations should you be incapacitated unexpectedly.

TAX PLANNING

In all the above points there are financial implication including taxation implications. Make sure that in addition to good legal advice you tap into good taxation advice from a non family member accountant.

None of the contingencies we suggest you plan for is pleasant. Your planning for them is not you looking forward to them. Rather, your planning is another example of good management and your care and concern for your business, partners, family members and customers.