If you are still involved in your business, chances are you aren’t expecting
your imminent demise. Hopefully, you have a will so your loved
ones understand your wishes after your passing. Your will is limited
to addressing who should receive the assets you own, but will not
address the details of converting your business into cash your heirs
can use. A Buy-Sell Agreement will handle what a will cannot. Think
of a Buy-Sell agreement addressing the “what if ” of an unexpected
death to be a sort of extension of your will.
Preparing for the unexpected: Death
I could tell you many horrible stories about business owners dying
unexpectedly and leaving their largest asset (the business) to be hurriedly
sorted, marketed, and sold in a fire sale for much less than its
value. In some cases, employees banded together and moved down
the road, taking loyal customers with them in the absence of noncompete
agreements, and the surviving spouse was left with nothing.
You built this company and you deserve to leave some sort of legacy,
where your customers and employees are cared for and your heirs
receive the full value of the company you worked so hard to build.
If something happens to you before this essential planning is done it
will leave your legacy in jeopardy, your employees in limbo and your
loved ones picking up the pieces. You can, and you should do this, but
it takes planning called “de-risking the business.” Your Buy-Sell agreement
will address the ultimate disposition of your company, but this
plan is a sort of bridge to keep everything going until that happens.
Example of the unexpected death – the sad widow story
As I prepared the room for one of our 2 day retreats, I happened to
meet a woman named Sally who was helping us set up. Upon learning
the content of our retreat, she confided she wished she had known
such information existed. It turns out she had operated a business
jointly for 20 years with her husband. It seemed to her at the time,
she knew everything there was to know and would be able to run
the business without him. When he died, she realized there were
many duties he solely performed that she had not done first-hand in
years. She suffered “grief brain” and couldn’t remember what she had
known and had less stamina and drive to get things done. She realized
they had done little to no planning in the case of the death of either
of them. The oddest thing was a ring with 12 keys on it that were on
his desk when he died. Four years after his death, she still has no idea
what any of the keys unlock.
This doesn’t have to be your story. In our Exit Strategy seminars
and retreats, we teach people how to make an “If I die” box or binder.
In this binder, you should put the following:
EMERGENCY BUSINESS CONTINUATION CHECKLIST
(“IF I DIE” BOOK SUGGESTED CONTENTS)
Is your Will updated and included in the IF I DIE Book? ______________________
Who is first to implement the IF I DIE section of that book? ______________________
If that person also dies, who is second? ______________________
Is there more than one signer on the bank account? Who? ______________________
What happens if the second signer also dies? ______________________
Is there more than one director in the case of a corporation? Name them: _______________________
Is there more than one member in the case of an LLC? Name them: ____________________________
If the business requires a licensed person to perform work or sign off on work, is there someone
besides the owner who has that license? Who? ______________________
Has that person agreed to (signed off on) that responsibility in the event of death / disability? Yes No
Review notes payable to ensure that any notes cannot be accelerated upon death of the owner/
Will key employees stay in the event of death of the owner(s)? Yes No – consider “Stay”bonus
Do key employees have Non-Compete contracts? Yes No (If yes, put in binder)
Is there a broker to contact immediately upon death of the owner? ______________________
Where are the passwords kept? ___________________(include owner’s phone code to open it)
Whoever controls cash flow needs to explain, in writing, how they do so, including:
1. Where is a schedule of typical accounts payable (regular bills), which are paid and which
2. When are pay days?
3. What is payroll process and how does it initiate/ where Is it processed?
4. Where is a list of accounts receivable? (assume Quickbooks, but not always)?
5. Is there a line of credit and how does it get drawn on?
It will be a good idea to give a copy of your instruction list to someone
else, like your trusted accountant or attorney, who can review it
with you while you are still alive and then assist the person carrying
out your wishes with a better idea of your vision.
Since passwords get changed a lot, keep them all in a Password vault
app such as Keeper or LastPass, and just put the password to the vault
in the If I Die box.
The main goal of the If I Die box is to leave simple, clear instructions
for the (likely) grieving people who will execute them in your absence.
Make it easy on them by making it as straightforward as possible.
Excerpt from “50 Ways To Leave Your Business (There Must Be) by Sandra Finch. Now available on Amazon.