Consequences of a Sole Business Owner Dropping Dead Without a Contingency Plan

Consequences of a Sole Business Owner Dropping Dead Without a Contingency Plan

Every sudden death or disability is a tragedy. For those that own a business and do not have a contingency plan in place their legacy is confusion, high costs, stress and anxiety for their family, employees, customers, vendors and everyone else that depends on that business in some respect.

Businesses are organic in that they are depended upon by a large number of people for many things and do become part of people’s lives. Owners who do not plan, short change those they leave behind… saddling them with doubt and many times with unnecessary and unfavorable consequences. Lack of planning is not done through ignorance, but through arrogance. Making plans for your death is difficult and unpleasant… but it is a necessary part of life. It is a courtesy for those closest to you that contributed to your success.

Here is a listing of some of the things that flow fromnot planningand could possibly be avoided with a little bit of work:

• The business will need to be liquidated or sold by someone that either doesn’t know how to do it or someone who might not be authorized to do it for a delayed period of time
• Any sale or liquidation will be done under stress with much lower receipts than could have been obtained with an orderly plan
• Employees will need to be let go or salary payments will be in doubt.Responsibilities and loyalties will not be clear to them if they stay
• Long-term employees might not receive minimal severance payments, or will quickly start looking for a new job and will not be available to help with the process of unwinding of the business
• Customers expecting deliveries or services will be left unaware of what they will receive and when
• Customer projects might have to be cancelled with penalties or continued at losses
• Contracts will be defaulted on with undue costs
• Leases will encumber asset transfers and will carry penalties if broken, or ongoing costs if maintained without a viable operating business able to make continuing payments
• Loan repayments can be in doubt… sometimes forcing the bank to act precipitously
• Family conflicts are more likely to arise with confusion and no clear instructions or mandate
• Litigation will be probable
• Valuation experts might need to be engaged, as will attorneys
• A surrogate’s court might appoint people to run, liquidate or oversee the business with addedcosts including bonding, accounting costs and reporting fees
• Accounts receivable willneed to be collected, inventory sold, work in progress finished orpenalized if abandoned
• Tax returns will need to be filed and accountings made to beneficiaries and the court

Problems don’t disappear if they are ignored – they fester and grow. Putting simple plans in place can make unpleasant necessary actions easier and less costly to bear. Planning doesn’t affect an owner’s independence or actions and has no consequence unless a sudden death or disability. Plan and don’t be a jerk!

My next blog will suggest a contingency plan.