business continuity plansMany people are familiar with estate planning and how it can help their family in the event of their untimely death. What these people may not know is that estate planning alone cannot help reduce the your company’s odds of failure if you happen to pass. To ensure that your company can survive long after you, you will need a business continuity plan in addition to your personal estate planning.

What is a business continuity plan? It activates when a major business partner — or the sole business owner — dies and the business needs instructions for how to continue. Creating a business continuity plan with the help of an experienced attorney and CPA can not only promote the longevity and success of your business after you pass, but the act of creating one can even help you grow the value of your business from within.

Ideally, a business continuity plan will take into account the possible loss of financial resources, the loss of key talent, and the loss of key employees or accounts when considering the full ramifications of an owner’s death.

Business Continuity Plans Can Prevent Financial Instability and Major Losses

When a sole owner or a major partner in a business passes, they may be taking a significant amount of credit and available capital with them. Personal lines of credit they used to prop up the business will be lost, and their personal capital can get tied up in their estate unless specific business continuity plans are made.

The most sensible thing a business continuity plan could do is set up emergency capital and lines of credit. Financial assets can be maintained in a trust and tapped in the event of a key partner’s death. These assets can also be used to establish lines of credit.

A life insurance policy on the deceased can also supply immediate, short-term liquidity that helps the business solidify their capital standing. Business owners should therefore strongly consider the needs of their business when purchasing a life insurance policy and arranging things like buy-sell agreements.

Business Continuity Plans Can Encourage Long-Term Talent Management

If a business relies heavily on one owner or a major partner, then that person’s death can easily put the future of the organization into question. A business continuity plan can address this issue by naming a specific person as a replacement or establishing a set of criteria for finding a replacement following the key member’s death. Ideally, the key member will apprentice one or more employees to give them the skills and knowledge they need to carry on their legacy.

Business Continuity Planning Can Prevent the Loss of Employees, Clients or Partnerships

The death of a major partner adds uncertainty to a business’s future, so many employees, clients and partners may attempt to jump ship. A business continuity plan can provide stability and a sense of assurance to these individuals, increasing their odds of staying aboard. It can also establish “stay bonus” incentives for employees and others following an ownership change, which can be covered using the life insurance policy of the deceased.

Working With an Experienced Attorney and CPA to Craft Your Business Continuity Plan

To make sure that your business can weather your death, start working with a knowledgeable attorney and CPA on your business continuity plans today.