"What will happen to my business if something happens to me?" Colorado is the most entrepreneurial state in the U.S. and this is a question we get a lot.
Including your business in the estate plan is essential. There are several important things to consider. If the business owner passes away is there someone who has the ability to step in and keep things running? Maybe a family member could manage things? Or is it better to simply sell the business as soon as possible?
Under the default law, with no business or estate planning documents in place, the business may simply be frozen in place. Generally speaking, once the business owner disappears, no one will have the authority to act for the business except through the probate process. As most people know, the probate process is not quick, and by the time someone gets the authority to act it may well be too late to salvage the business.
Fortunately, there are a number of ways to plan ahead for this issue. Usually planning provisions should be included in a business' Operating Agreement or Articles of Incorporation. Though you can include them in traditional estate planning documents such as wills, powers of attorney, and trusts, that can lead to many problems.
Common provisions include the right of an employee to purchase the business at a certain price, appointing a manager to step in and sell the business, or outright assigning the business to a chosen individual. Another common measure, in the case of partnerships, is for each person to purchase life insurance on the other. The proceeds often go to the deceased's family in return for his share of the business. This removes any responsibility for dealing with the business from the grieving family.
There are any number of solutions available for dealing with the passing of a business interest. In many ways, clients are limited only by their own imagination. The important thing is to have a plan in place.