The 3 Documents You Need to Protect Your Business

You’ve built a businessful business, but your job isn’t over yet. One of the most important parts of creating a profitable enterprise is ensuring that it continues to do well (even when you’re no longer at the helm) and, ideally, increases in value. Below is an overview of the three documents that you need to protect your business and its future.

  1. Buy-Sell Agreement

Buy-sell agreements have been called “prenups for businesses” because they clearly outline contingencies for various outcomes, including what will happen if:

  • You need to transfer your interest in the company
  • You pass away, divorce, retire, or file for bankruptcy
  • Any of your partners or co-owners can no longer be involved in the company

Examples of succession plans in a buy-sell agreement include transferring a departing member’s assets to a family member or into a living trust. Whatever arrangement you go with, the goal is to reduce the chance of misunderstandings and infighting that can tear a company apart.

This agreement also has financial implications: it provides guidance on how to value company stock and is usually funded through insurance, making it easier for your partners or co-owners to buy your share if you pass away.

  1. Estate Plan

Like a buy-sell agreement, an estate plan will preserve the value of your company by controlling what happens to it when you pass away. A strategic plan will transfer your business assets while minimizing the taxes that the estate or your beneficiaries have to pay and providing enough liquidity to pay any outstanding company debts. 

Once you have an estate plan in place, be prepared to update it whenever your needs and those of the business change. Some business owners have a plan drawn up and never amend it, which may make its provisions ineffective by the time you pass.

  1. Emergency Management Plan

If you watch a lot of suspense movies, you’ve likely seen the scenario where someone leaves a letter that is to be opened only in the event of their death. The letter invariably contains instructions or information about actions the writer wants the reader to take in their absence.

The emergency management plan is similar: it provides management instructions if you die or become seriously disabled. For example, you can:

  • Name an interim president, CEO, director, etc., for the company
  • Specify the process for naming a new (insert your role here)
  • Dictate how you want the news related to customers, suppliers, financial institutions, etc.

A company emergency management plan is an invaluable form of crisis control. If something happens to you, employees may panic and leave or major clients could become nervous about their future arrangement with the business- unless there is a plan to reassure them.

Don’t leave anything to chance. If you want to future-proof your company, these three documents will protect its value and ensure that your survivors and successors are taken care of. If you need help with business succession planning, click here to schedule a time to discuss how Soterian can help! We will show you how to identify your How when it comes to a solid continuity strategy.

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At Soterian, our goal is to help business owners like you think bigger. Bigger than today, bigger than your business, bigger than yourself.

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