Sole Ownership and Planning for The Unexpected

A sole owner of a business who has a spouse and/or family has not a few key planning issues that need to be addressed before it’s too late.  “Too late” being the unexpected events of death or permanent incapacity or disability.  To illustrate, let’s use the following story that is based on real life events…

John Doe owned a very successful commercial real estate development firm.  He regularly met with his Business Advisor and they “game planned” aggressive growth strategies that were proving to be successful in building the value of the business.  To the point where John was seriously considering expansion into other geographic areas.  Life was good and the business was growing rapidly!

One evening after meeting with his advisor, John experienced a sudden heart attack and died later in the hospital.  At age 55 he still had family financial responsibilities, yet he had not been as thorough in his personal and family financial planning as he had been in planning to build the business.  It was time of extreme grief and mourning as well as uncertainty for Jane…

o   She didn’t know what to do next.

o   She didn’t know if John’s salary would, or could, continue.

o   Employees and customers started to leave as there was not a plan, and so the business became less valuable and sellable.  This was problematic as Jane was dependent on the sale value of the business as John had limited life insurance and investable assets.

o   Due to the high level of uncertainty, there was a lack of peace and stability for Jane and for everyone who was at all dependent on the business.

There were too many things that John didn’t do, and should have been done, to mention in a short blog post. So, highlighted here are just a few (not an exhaustive list) of the key planning solutions that, if John had put in place, would have helped in minimizing the agony that Jane and the family experienced…

 §  Clear written instructions that were aligned with updated and adequate estate planning documents as to how to continue the business.

§  A personal financial plan that included a cash flow analysis of how much money Jane would need both short-term and long-term in the event of John’s early death. 

§  A written resolution for Jane to continue to receive John’s salary until insurance proceeds were received.

§  Plans for the business bank line of credit to continue uninterrupted.

§  A current and adequate personal life insurance program.

§  Key person life insurance on John that would have provided needed liquidity for the business to provide key employee stay bonuses, etc.

Due to the importance of Business Continuity planning for a business owner and their family and business, we provide on a complimentary basis the following:  1) Business Continuity Instructions document that is a fillable PDF.  2) One-hour Business Continuity Instructions consultation.  Please contact us and take action today.