Top Tips to Protect Your Business from Sudden Death

Follow these tips to protect your business from a co-owner’s (or even your own) sudden death.

1. Cross-train co-owners and employees, even for your own job.
2. Communicate in writing all job duties and passwords, as well as the location of important papers, keys, and so forth.
3. Organize and record all customer information.
4. Keep accurate and up-to-date accounting records that include a list of regular bills, vendors, customers, approximate amounts owed, and when payments are due to or from the company. This can easily be done in QuickBooks with invoices and memorized transactions for payments to vendors. Power and utility bills should be a priority to avoid service interruption.
5. Get key man insurance to hire new employees or cover lost revenue in the event an owner dies.
6. Get insurance to cover owners’ salaries for personal obligations.
7. Create the following documents and update them periodically:
   – Wills or trusts to specify who (beneficiaries) should inherit interest in the business or receive money related to any buy out from co-owners.
   – Ownership agreements (generally, operating agreements for LLCs or buy/sell agreements for corporations) to specify whether the co-owners are in business with the beneficiaries or have rights or obligations to buy out those beneficiaries. Pursuant to the NC intestate statute, without a will, trust, or well‑drafted business ownership agreement, the deceased’s children or parents would own a portion of the deceased owner’s share of the business. This can create additional issues if the children are minors.
   – Powers of attorney with specific power to manage the business, which should include alternates in case the first person named is not available.

Related articles

Overcoming Crisis: Picking Up the Pieces
Tips to Limit Your Risk
Tips to Prepare Your Business for a Sudden Interruption

Helen Ruth (HR) Harwell, Harwell Law Firm, P.A., harwelllawfirm.com

(Disclaimer: any legal perspective shared in this article does not create or constitute an attorney-client relationship nor convey or constitute legal advice.)