Business and Succession Planning
Something that I have learned over the years in working with small business owners and with clients’ estate planning is that very often these areas overlap. One of the most common deficiencies is not having a current buy-sell agreement between the owners of a business. The purpose of such an agreement is to provide a mechanism to avoid disputes in the event an owner dies, becomes disabled, or wants to retire or just leave the business. In the absence of an enforceable agreement all of these occurrences can end up in court. The best time to sort out these issues is when all of the owners are actively involved in the business since any of them could either be a buyer or a seller of their interest in the business and that tends to keep the discussion balanced and fair. The climate changes dramatically when the spouse of a deceased owner who is inheriting the business is desperate to get as much money as possible from the business. The other issue that arises at that point is whether the surviving owner(s) can continue to work with the spouse or family of the deceased owner. Most buy-sell agreements contemplate a fair buy-out of the deceased owner’s share so that a problem does not arise. A common method of funding these buy-sell agreements is with life insurance.
Business Upkeep and Maintenance
Another common deficiency is maintaining good records in the business. If it is a corporation or LLC (limited liability company) the annual filing with the state must be maintained or the business could be administratively dissolved and the limited liability protection may be lost. When clients come in for business or estate planning we review the filing records and quite often this has happened. With corporations it is important to maintain the corporation book with updated articles and bylaws as well as copies of shareholder and board of directors meeting minutes. The stock ledger needs to be properly maintained consistent with stock ownership. With LLC’s or partnerships it is very important to review the operating or partnership agreement to make sure it is consistent with the understanding of the owners. These documents can become critically important if there is a dispute among the owners or if one of them dies or becomes disabled.
Business Divorce Litigation
The attorneys at HAO look for these kinds of issues and have many years of experience in formulating solutions for these problems, but the law suits that arise when business owners cannot resolve their differences look and act very much like divorces. We have been involved in a number of cases involving disputes that have arisen in these circumstances and are skilled in litigating them. However, our experience has taught us that it is a lot easier and cheaper to keep our clients out of trouble than it is to get them out once they are in. We would be happy to help you avoid these kinds of problems so give us a call.