Most people do not want to consider or talk about what happens when a business partner dies. However, it is an important part of planning when forming a business in order to avoid struggling to implement the next steps for the business during a difficult time.
Business Continuity Planning
We would urge business owners to create a properly arranged and funded agreement that is legally binding. This is because without proper planning, the premature death of a business owner could result in the business being liquidated, sold to outside parties or forcing family members to become active in the business.
Planning is crucial to ensure an orderly transition in ownership. It is an important part of any business plan and can come in handy in the event of the unexpected. A plan would be designed with the aim to promote fairness, as business partners can discuss and modify their choices during creation and implementation.
It’s best to do this in advance, preferably when the business is first formed. This can avoid headaches and costly disputes later, such as the deceased partner’s relatives withdrawing shares within the business.
It is important to consider a variety of things when succession planning:
- Knowledge Transfer: spread knowledge frequently across all employees.
- Identify a Successor if Necessary: If the plan does not involve multiple business partners, though needs to be given to who will take your place.
- Finances and Cash Flow: whether your business can withstand the loss of your input needs to be factored in.
Companies that address continuity planning are more likely to continue their success and maintain momentum. Businesses can struggle to figure out next steps if planning is not in place. If you need help with planning and forming your business, call our professional team on 0800 0198 698.