Lately we have had a number of requests for “business wills.” Although this isn’t a formal legal term, it is something that we have given a lot of thought, as the numbers of solopreneurs and consultants continues to grow in our changing economy. Simply put, a business will (or business continuation document) sets out what you want to happen with your business if something happens to you and you are the only owner of the company. So what do you need to think about when drafting a will for your business? We’ve found a few common themes in the agreements we’ve drafted lately.
- Talk About It. This is a similar need to personal wills, the need to discuss what your wishes are with those who will be carrying them out. But for business wills, where there needs to be two agreeing parties to make things work at all, this is even more vital. If you think you are going to want one of your employees to run the business in the event of your disability, make sure that employee knows this and is willing to take those tasks on. If you will be giving ownership of your business to a loved one in the event of your death, make sure they have any idea what they will need to do to keep the business running.
- Spread the Love. Just as you don’t have to include any particular relatives in your personal will, a business continuation/will document is not a time to feel as if you owe anything to anyone. If you have an employee who you know would make a great leader in your absence and would be able to keep the business running, do not feel as if you have to first offer that position to your spouse or heirs. There are ways to turn the financial ownership of the company over to your family member or other heirs you would like to provide for and to install an employee to manage things in your absence. Similarly, by planning ahead you may be able to provide for your family in other ways (such as life or disability insurance) and also be able to keep the company running and your employees employed by having one of them manage the business.
- Stay in Control. Just as you call the shots now, you may still want to have a good deal of control even if you are unable to completely run your business alone. Make sure your business will document deals with this. Some good examples are – Do you want the designated “next in line” to run your company to be able to declare you disabled if you don’t agree? (in most cases, no); Do you want a say in how soon after your death the business can be sold, and who you’d like to give a right of first refusal to make that purchase (if you have employees, this may be even more important). Thinking about all of the “what if” scenarios is vital before you sign a business continuation document and hand over a great deal of power in your company to someone besides yourself.
If you are a solo business owner or consultant, often the next important step after forming a company or choosing an entity is drafting a business continuation/will. Each business is different and requires specific consideration, and the attorneys of Davis Law office are always willing to discuss your particular needs. Feel free to drop us a line or stop by one of our three Minneapolis locations to discuss your particular questions.