When your small business is dependent upon you for daily actions and activities, you need to ensure that you have a plan in place just in case something happens to you. A business that is dependent on an owner will likely go under if that owner passes away suddenly. This can mean a tragic outcome for your company, and it might also be a tragedy for your family members if they’re counting on the company for income.
One of the most important steps you can take is to have a succession plan in place. This provides the steps your company will take in order to transition it to the new normal. You have to determine whether you are going to transfer the company to another person, such as a family member, or whether you are going to have it sold to an outside entity. No matter which plan you set, you must ensure that there are instructions for how the company will run in your absence.
Another consideration is how you will ensure that the company has positive cash flow during the transition. Positive cash flow for your family is also important. You might be able to accomplish this by securing two insurance policies. One is a life insurance policy that names a family member as beneficiary, or you might establish a life insurance trust to handle the distribution of the policy.
The other is a key person insurance policy, which names the company as beneficiary. This can help the business to cover bills if the profits dip during the transition phase.
Small business owners might have other considerations, so be sure to discuss your situation and any concerns with your estate planning attorney. You might be able to enhance the security for your company and your family members if you have a suitable estate plan in place before your demise.