Do you have a business baby? You need to read this.

 

If you own a business, like me, you’ll likely wear many hats [HR, accounting, marketing, sales] etc].

 

There are many moving parts.

Some parts we can control.

Some parts we can’t [COVID-19!].

 

One thing that is constant? Your business will form part of your legacy.

 

You’re probably thinking – “why should my will be different if I own a business?”

 

Well, there are many reasons. From a business perspective? You need to think about the financial/legal aspects of owning a business and what happens if you are no longer part of the business – how does it continue? Does it continue?

 

On a personal level? Who is going to keep control of the business vehicle if you are out of action? Your business partner? Your spouse? Do they even want to take control?

 

 

THE LEGAL DOCUMENTS

 

The complexity of your business and your will comes from delving deep into the legal documents.

 

Think trust deed, company constitution, partnership deed, shareholders agreement.  

 

[Still with me …. ??]

 

Many people may never have seen or really looked at these documents. Maybe you don’t even know you have one, or where they are?

 

These documents are important. They identify the replacement decision makers and outline the ‘next steps’ processes.

 

What excites me about this? [hey – each to their own].

I use my business/willskillz to identify the decision makers, their replacements and look at the process to iron out any kinks now [with you].

 

It’s not just about knowing you have these documents in place. It’s about understanding how the structure works and the financials. They are moving parts. Things change in business all the time. Your will specialist needs to understand these [deeply].

 

So, as you can likely tell, I get a real thrill out of using my business/willskillz to identify what goes on in a business structure.

 

Here’s an example to think about:

 

Every year you might distribute income for tax purposes, but the funds remain in the business for working capital.

 

This could create an amount owing to you [loan] which will be an asset in your estate.

 

Maybe there are loans in place between business owners and the business?

 

These too will affect your estate and need to be taken into account when looking at what you want to achieve for your VIPs.

 

Imagine deciding to transfer your family business to your chosen business successor (e.g. child) and the whole process being undone by an unidentified loan.

Nightmare.

 

In laymen’s terms: your will specialist needs to think about these things with their blinkers off, to make sure what you want to happen, actually happens. They’re going to need business nouse, AND wills nouse.

 

 

THE PEOPLE [having the right people in the right roles]

 

The other big kicker in estate planning for business?

Does your enduring power of attorney nominate a BUSINESS financial attorney to make decisions in your shoes?

 

The next big question is: does it make sense for your personal financial attorney to be the same as your business financial attorney? Maybe not.

 

You can nominate separate people to make different types of decisions (concurrent powers).

 

1 person to wear your ‘personal financial hat’ [superannuation, household expenses etc.]

 

You can nominate a different person to wear your ‘business financial hat’ [hiring, firing, refinancing debt etc].

 

This is something that financial institutions, government agencies, share registry’s want spelt out clearly so they can be confident the right person is making the right decision.

 

What you don’t want is for your VIPs to be left arguing with a bank to get things sorted [while dealing with grief – and often for significant additional cost], when it could have been managed simply.

 

Have a think about this…

 

If your business partner was no longer able to act in their current role, would you be comfortable making business decisions with their spouse?

 

Or would you want to continue making business decisions as you do now [e.g. you making the call]…?

 

Another scenario.

 

If you aren’t able to make the decision anymore [because you’re incapacitated or dead] – is it your spouse or next of kin, who you have left to make the call? Or is it your continuing business partner? Or both? Who are the people in the decision-making seats [the hot seats]?

 

THE TRICK [make conscious decisions now]

 

The trick is to be conscious about the decision – instead of the incident happening, scrambling to find the documents, trying to understand them, then someone ill-equipped having to make big decisions – all at the same time of dealing with losing you.

 

If you’re the family CFO and your also running a business, and something happens to you – do you have the right legacy in place? (documents/ framework / support network / worked through transfer or control to the right person).

 

No? Not only will your VIPs have lost you, they are also going to be lumped with an administrative nightmare to handle.

 

It’s a no brainer. If you’re in business with someone else outside of your family, there needs to be some overarching guiding documents (e.g. shareholder agreement etc.) with pre-decided trigger points and action plans, how the control positions will be managed, and how any pay-out will occur [if that is what needs to happen].

 

It’s basic business risk management – contingency planning.

 

You can plan for a black swan event. This stuff happens. It can be a well-thought-out plan that you hopefully never have to execute – but you’ll be glad you did, it if the time comes.

 

WHY YOU SHOULD DO IT [for you and your loved ones]

 

If you’re the one leaving the legacy? You’ll feel confident your family is looked after and the business is left in a sustainable position and not financially crippled.

 

If you’re continuing the legacy? You’ll feel confident in the decisions you need to make.

 

You can just focus on making the decision. Not agonising about what your partner would have wanted. The framework is there, and the insurances are in place, so you can focus on supporting your partner’s family – not the administrative and financial obligation of figuring how to pay out your partner’s share.

 

WHAT’S WORSE [now this is a tough one]

 

Crippling the business to make a pay-out and affecting your family’s financial stability?

Or not making a quick pay-out and affecting your deceased partner’s family’s financial stability?

 

Imagine having to tell your partner’s spouse that you can’t pay them because it would cripple the business?

 

See?

 

Just do it.

 

MY SUGGESTION [collaboration is key]

 

Don’t do this in isolation with your lawyer only. It needs to be done collaboratively.

You. Your business partner. Your accountant. Your financial planner. Your lawyer.

You don’t all need to be in the same room at the same time, but I recommend keeping everyone in the loop.  You’ll achieve a better result.

 

It’s better if you can get everyone streamlined from the start, rather than everyone working independently [billing independently] and trying to bring it all together in the end.

 

Investing in getting the people involved upfront may be a higher initial cost but think of the billing hours you will save from re-work. Getting people on the same page from the start will deliver a better result for you and your VIPS.

 

ACTION? 

You don’t need to have all of the answers right now. Sometimes it is just a matter of putting something in place, and you can come back to make changes as you need to. Something is better than nothing.

 

If you have a business – you need to consider it PROPERLY in your will.

Find the right will specialist for you. One who will invest the time to get this right.

 

By taking control now – you’re going to give your VIPs the security and peace of mind they need [and deserve] when the time comes.

 

Believe me. It is 100% worth it.

 

 

P.s. I know that was a lot to take in. And yes, some of that is hard to imagine – but it is written with love and the intent to help you make positive decisions for you and your VIPs.