How will you leave your business behind?

Perhaps as a business owner, your Last Will and Testament is in place. Fantastic! What does this mean for your business?

It is unnerving to explain to business owners that they must consider their options with regard to estate planning in the event of their death. It is an uneasy thought for business owners to implement priorities after their death. The recommended way to approach these aspects is to have a clear understanding of the future endeavors of your business, prioritise the goals to achieve these endeavors, and thereafter update your Will to practically include these aspects.

While SME business owners are usually consistently working on the operational, financial, marketing, and HR aspects of their businesses, planning for succession and leaving a legacy are often lower priorities…

If you are a business owner, have you considered what will happen to your business if anything were to happen to you which may render you temporarily or permanently unavailable or unfit to proceed with your work?

All SME businesses have similar challenges in the event of the death of a key owner or manager. The standard concerns usually are: Could my spouse step in and run the show? Do any of our children have a stake or interest in running my business? Does a specific key manager or other employee have the best chances of successfully running or owning the company?

The last will and testament for your company, usually the Memorandum of Incorporation and Shareholders Agreement, may in fact be a Buy-Sell Agreement amongst the owners that provide for ownership, management and transition upon death. Another consideration is that the costing of transferring ownership upon death of any of the shareholders, can also be financed through key-man life insurance that can be expensed out through your business. Does your business have a plan and policy in place?

For all SME business owners, drafting a business succession plan and correct company documents, last will and testament and the appropriate power of attorney documents can provide significant security for their businesses. Failure to have these documents in place, could have detrimental results for the company and for the loved ones you leave behind.

Further, your spouse may be at great risk if you are married in community of property. This means that any profits and losses of your business are shared with your spouse. In the event of death, your spouse could be held liable for settling your business’ debts, unless the core company documents are in place and specify otherwise.

In conclusion, consider if you and your business have the required documents, aspects and agreements covered. Depending on your personal estate planning and your business’ forms and structures, consider which of the following documents may require drafting or updates:

  • Memorandum of Incorporation;
  • Shareholder Agreement (shareholder deaths, departure or retirement, unexpected disability, owner termination, divorce, individual bankruptcy);
  • Business Plan;
  • Business Succession Plan;
  • Buy-Out Agreement;
  • Last Will and Testament;
  • Antenuptial Agreement;
  • Power of Attorney; and
  • Trust Deed.

If you are unsure about any of the aspects and documents listed above, connect with a business lawyer to explain the practical use and application of these documents for your business and legacy, should something ever happen to you as business owner. It is crucial to have a plan and measures in place to protect your business, your business partners, employees, clients and your loved ones.

Erasmus Botha Incorporated is a law firm which is passionate about representing SME businesses and the people who own, supervise and manage these businesses. For queries relating to this blog or legal assistance , connect with the author at: [email protected].

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