Meet the New Boss:
Protecting Your Business’
By Dick Yemm
Life-changing, triggering events occur
suddenly when least expected. Being prepared is key to protecting
the survival of your business. In all cases many scary moments
occur. Take the case of Bob Stone.
An accidental fall in his office
resulted in a lengthy coma. Prior to the fall he had felt
invincible. Stone intended to operate the business for another
fifteen years before giving it to one of his younger children or
selling it. His family was solely dependent on the company for
income and benefits.
Stone regained consciousness ten months
later and found everything concerning the business had been going
great considering the slowing economic climate. Hard decisions
reducing the number of employees and scaling back the company had
just been completed prior to the accident. Critical decisions
remained that would determine the business’s survival.
His fall set into motion a contingency
plan that included a Durable Power of Attorney and Operating Plan.
Stone and his wife Elaine had developed the plan with the aid of a
business-experienced planner who emphasized the importance of
including the operations plan just in case something happened
Elaine had worked with Bob building the
company for fifteen years before retiring to raise their family. He
frequently updated her as to the status of the business. She was
aware of the company’s fifteen employees’ strengths and weaknesses
and current and future contracts.
Once Elaine was satisfied that
everything possible was being done for Bob, she turned her attention
to running the business. She took Bob’s Durable Power of Attorney,
giving her legal authority to substitute for him, and the company’s
operating plan from their home safe. The plan told her:
To contact the listed professional
Who to trust
Key operating information
Options for keeping their owner
interest in the company
Where to obtain additional
Her prior experience together with the
assistance of loyal employees and professional advisors allowed her
to step in on short notice to operate the company. Key to
preserving the business’s survival was:
This story is the exception, not the
rule. Caring for the affected spouse can be emotionally draining and
time consuming. Most family businesses end up failing when the
principal spouse is unable to participate in daily operations.
Consider the alternatives. Waking up to:
Without any Planning - The business stumbles along as chaos rules the day. State statutes will
determine the business’s future if the business can continue
to operate long enough while new leadership is determined. Odds are
Bob will not have his business to return to when he awakes from his
Elaine in this case is ill prepared to
take over the business. She has to hire an attorney to represent
herself and other members of the family, draining the remaining
family savings. Elaine becomes financially desperate as the family
income from the business ceases. Benefits such as health insurance
are only continued as long as Bob’s owner interest is retained.
Time becomes of the essence as Elaine’s
legal representative tries to protect the business’s survival.
Obtaining an opening in the court’s schedule can be difficult. Few
operating decisions are rendered in an initial hearing. If multiple
parties challenge the direction of succeeding hearings, the case can
take months and sometimes years before a final decision is rendered.
Very few courts have been successful at
micro-managing a business. In a worse case scenario several hearings
are necessary before a judge:
Appoints an attorney to represent
Appoints a guardian for Bob
Appoints a conservator to oversee
Approves a new manager to replace
Bob as principal operator
In the meantime the business is left to
flounder on its own. Elaine in the end is forced to sell the
business, or if it has closed, sell remaining company assets as she
runs out of money and time.
Estate Plan with no Operating Plan -
Estate planning typically includes a Durable Power of Attorney
for incapacity and a Will for death. Generally there is no operating
plan for a business. Key to protecting the survival of a business is
its continued operation.
A named successor without operating
knowledge or management experience is like someone walking into a
black room with no operating light switch. Elaine’s application of
Bob’s operating plan ensured the family business’s continued
operation. What makes the survival difference?
Estate planning that included a
Durable Power of Attorney
An operating plan
Identifying a successor
Minimizing time to transfer
An appointed successor’s industry
operating knowledge and experience
Stone and his family are fortunate that
Elaine was able to keep the family business operating while he
recovered. Bob had a business to come back to while the family
retained its financial life-blood.
Each business is unique requiring its
own customized planning. A business owner needs the aid of a design
team that includes a legal, tax and professional successor advisor
who has operated a company. It is difficult for an owner to be
objective if they try to do it all on their own.
Is your business prepared to operate on
a continuous basis without you? You need a plan!
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