If you are running a business, it’s easy to give estate planning less priority than your other business matters. After all, if you’re facing challenges meeting next month’s payroll or your goals for growth over the coming quarter, concerns over your potential incapacity or death can seem far less urgent.

But the reality is considering what would happen to your business in the event of your incapacity or when you die is one of your most pressing responsibilities as a business owner. Although estate planning and business planning may seem like two separate tasks, they’re actually inexorably linked. And given that your business is likely your family’s most valuable asset, estate planning is crucial not only for your company’s continued success, but also for your loved one’s future well being.

Without a proper estate plan, your team, clients, and family could face dire consequences if something should happen to you. Yet these dangers can be fairly easily mitigated using a few basic estate planning strategies. To demonstrate why proper estate planning is so important for business owners, here are four issues your company and family are likely to encounter as a result of poor estate planning, along with the corresponding estate planning solutions you can use to prevent and/or mitigate those issues.   

Issue #1: If your estate plan consists of only a will, your estate—including your business and its assets—must go through probate when you die. 

When it comes to creating an estate plan, most people typically think of a will. While it’s possible to leave your business to someone in your will, it’s far from the ideal option. That’s because upon your death, all assets passed through a will must first go through the court process known as probate.

During probate, the court oversees your will’s administration to ensure your assets (including your business) are distributed according to your wishes. But probate can take months, or even years, to complete, and it can also be quite expensive, which can seriously disrupt your operation and its cash flow. What’s more, probate is a public process, potentially leaving your business affairs open to your competitors.

Plus, while your family and team may know how to run your company without you, they might be unable to access vital assets, such as financial accounts, until probate is concluded. Moreover, even if they can access all of the needed assets, the legal fees charged by the lawyers your family will likely have to hire to help them navigate probate can quickly deplete your company’s coffers.

And this is all assuming your will isn’t disputed during probate, which is also a real possibility, especially with a highly profitable business at stake. If your heirs disagree about whom you name to control your business and/or how the business assets should be divided, a vicious court battle can ensue and drag on for years, dividing your family and crippling your company.

Estate Planning Solution: Given the drawbacks associated with a will, a much better way to ensure your business’s continued success following your death is by placing your company in a trust: either a revocable living trust, an irrevocable trust, or some combination of the two. A trust is not required to go through probate, and all assets placed within the trust are immediately transferred to the person, or persons, of your choice in the event of your death or incapacity.

When you die, having your business held in trust would allow for the smooth transition of control of your company, without the time and expense associated with probate. Plus, trusts are not open to the public, so your company’s internal affairs would remain private, and the transfer of ownership can take place in your lawyer’s office, not a courtroom. Finally, trusts, especially irrevocable trusts, can help shield your business and its assets from creditors and lawsuits, which could threaten your company with you out of the picture.

Issue #2: If you become incapacitated by illness or injury and you haven’t legally named someone to manage your business assets, the court will choose someone for you.

Another issue with relying solely on a will is that a will only goes into effect when you die and offers no protection for your business if you’re incapacitated by accident or illness. With just a will—or no estate plan at all—the court will appoint a financial guardian or conservator to assume control of your business until you recover.

Like probate, the court process associated with guardianship can be long and costly. And whether the guardian is a family member, employee, or outside professional, it’s doubtful that individual would run your business exactly how you would want them to, and this can seriously disrupt your operation. Not to mention, having a court-appointed guardian managing your business affairs can lead to serious conflicts and strife within both your team and family, particularly if you’re out for a lengthy period.

Estate Planning Solution: One estate planning vehicle that can prevent this is a durable financial power of attorney. A durable financial power of attorney allows you to name the person you would want to run your business and handle all of your other financial affairs if you ever become unable to do so yourself. If you’re sidelined by illness or injury, this person will be granted legal authority to handle your business affairs, such as managing payroll, signing documents, and making financial decisions. 

This not only speeds the expense and delay associated with the guardianship process, but it also ensures that while you are incapacitated, your company and other financial interests will be managed by someone you trust, rather than relying on the court to choose someone for you.

Though again, most ideally having a trust and a named Trustee, would allow your business to be operated in the event of your incapacity, without the necessity for any court process at all. 

Issue #3: If your business partner dies and you don’t have a legal agreement that allows you to purchase your partner’s share of ownership in your company, along with a source of liquidity to fund that purchase, you could find yourself in business with your partner’s heirs. 

If you share ownership of your business with one or more other people, it’s crucial that you have a legally binding plan in place designating what would happen to each partner’s ownership interests should one of you leave the company, get divorced, die, or become incapaciated. Without such a plan in place, along with the funds needed to execute that plan, all sorts of potential problems and conflicts can arise.

For example, should your partner die without such a plan in place and the partner’s children inherit his share of ownership in your business, you could find yourself in business with your partner’s kids or be forced to pay an inflated price for their share of the business. A similar situation could arise should your partner get divorced and your partner’s former spouse is awarded a share of the company in the divorce settlement.

Estate Planning Solution: To prevent such conflicts, you should create a buy-sell agreement. A buy-sell agreement outlines exactly what would happen to your business in the event an owner leaves the company for any number of reasons, or when one of the owners die, becomes incapacitated, or gets divorced. 

For example, a buy-sell agreement can ensure that should certain triggering events occur—like a partner’s retirement, death, or permanent incapacity—the remaining owners are able to purchase that partner’s share of the business. In this way, an effective buy-sell agreement can prevent you from having to deal with new partners you didn’t count on. At the same time, a buy-sell can help prevent your loved ones from getting stuck owning a business they don’t want and can’t sell.

In addition to having a buy-sell agreement in place, you will also need to have a source of funding that allows the surviving owners to buy out the deceased partner’s shares. In most cases, the best way to fund your buy-sell is by purchasing life insurance. For example, the company can purchase a life insurance policy on each of the owners, and the company would receive the death benefit to purchase the deceased owner’s share of the business and/or buy out the deceased’s heirs.

Issue #4: If you name a family member to run your company after your death and you don’t provide them with a detailed plan, your business can be ruined by just a few poor decisions.

There are countless stories of family members assuming control of multi-million-dollar businesses and running things into the ground in just a short span of time. And if such massive fortunes can be squandered so easily, it’s seriously doubtful that smaller operations like yours will fare much better.

Even if your successor doesn’t destroy your company, he or she can cause serious conflicts among your staff, clients, and family simply by managing the business radically differently than you. For this reason, simply naming a successor to take the reins in your absence is not enough.

Estate Planning Solution: A comprehensive business succession plan can help ensure your company doesn’t fall apart when you pass on. Beyond simply naming a successor, such plans provide stability and security by allowing you to lay out detailed instructions for how the company should be run.

From specifying how ownership should be transferred and providing rules for compensation and promotions to establishing dispute resolution procedures, an effective succession plan can provide the new owner with a roadmap for your company’s continued success following your death or retirement.

Secure Your Business, Your Legacy, and Your Family’s Future

If you haven’t taken the time to create a proper estate plan, your business is missing one of its most essential components. During our Life & Legacy Planning Process, as your Personal Family Lawyer®, we will work with you to create a comprehensive estate plan to ensure the company and wealth you’ve worked so hard to build will survive—and thrive—no matter what happens to you.

Furthermore, every estate plan we create has built-in legacy planning services, which can greatly facilitate your ability to preserve and communicate your most treasured values, insights, stories, and mementos with the loved ones you’re leaving behind. By working with us, you can rest assured that your business and legacy will offer the maximum benefit for the people you love most. 

You see, we’ve discovered that estate planning is about far more than planning for your death and passing on your “estate” to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get started with a Family Wealth Planning Session.

This article is a service of Sahmra A Stevenson, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge.

When you are just starting your business, it’s easy to lose sight of just how many potential risks your company faces. Yet a single accident or lawsuit can wipe out your company before it even has the chance to get off the ground. While setting up a business entity like a limited liability company (LLC) or corporation can protect your personal assets from liabilities incurred by your business, it won’t protect your business assets—that’s where business insurance comes in. 

You can’t protect your business 100% from every single threat, but you can greatly improve your chances of surviving by having the proper insurance coverage in place. That said, there are many types of business insurance out there, and some policies can be extraordinarily expensive, so it’s critical to know the specific risks your company faces and what types of insurance will best cover those risks.

Outside of mandatory coverage, such as worker’s compensation, there are several types of insurance that practically every new business owner should invest in. Depending on whether you have employees, use office space, provide services, or manufacture products, you’ll likely need some or all of the following policies.

General Liability Insurance

All businesses need general liability insurance, which covers lawsuits initiated by third parties (non-employees) for bodily injuries and/or property damage that are directly or indirectly related to your business. It’s important to note that such coverage—and indeed most coverage listed here—is needed even if you aren’t at fault. Keep in mind anyone can sue you for anything, and the lawyer’s fees can cripple your business, even if you win the case. The right insurance will cover your legal fees.

Commercial Property Insurance
Regardless whether you own or lease your office space, property insurance is a must. Such policies cover damage to equipment, furniture, and signage from events like fires, storms, and theft. Some natural disasters, like floods and earthquakes, may not be covered, so be sure to check with your agent to add additional coverage if you live in a disaster-prone region.

Professional Liability/ Malpractice Insurance
Also known as errors and omission insurance, this covers lawsuits alleging your professional services caused a client to suffer damages, arising from actions like negligence, mistakes, and violation of contract. Such coverage can be essential for a wide range of businesses—accountants, lawyers, real-estate agents, consultants, IT firms, and others. Check with us, your Family Business Lawyer™  to find out if you should have such coverage.

Vehicle Insurance

If your employees use a company-owned vehicle to conduct business, those vehicles  should have comprehensive commercial auto insurance to protect against liability as well as any injury/damage to your employees, vehicles, products, and equipment. If your employees use their own vehicles, their personal insurance often covers them. But it’s a good idea to purchase “non-owned auto liability coverage” in case an employee fails to renew their insurance or has inadequate coverage.

Employment Practices Insurance
This type of policy provides protection for lawsuits initiated by your employees. While this is an often-overlooked coverage, it’s actually one of the most important, since employment claims are the most serious threat to your business, even if you think you are the best boss on the block. In fact, studies show that nearly one in every five small businesses will get sued by a team member at some point in their lifecycle.

Cyber Insurance

From websites and social media to e-newsletters and mobile apps, virtually every business has a digital presence of some type. Cyber insurance protects against damages from threats to your computer systems and databases, such as data breaches, hacking, and network failures. If your data is lost, stolen, or compromised, the cost to recover and restore this information can be exorbitant. Such coverage also protects you from lawsuits by customers, vendors, and others whose data is stolen from your system. It can also cover the cost of notifying affected parties of a breach, which is typically required by law; paying regulatory fines; as well covering lawyer fees, judgments, and settlement costs resulting from a lawsuit.

Umbrella Insurance
Umbrella insurance offers an extra layer of coverage which would pay for any claims that exceed the payout limit of your other policies. Note that umbrella insurance is not offered as stand-alone coverage, and you must first have an appropriate underlying policy in place to qualify for it. In fact, you may not qualify for umbrella insurance if your underlying policy doesn’t offer high-enough payout limits.

Get Your Startup Covered Today

Every business has its own unique risks and assets, so there’s no way to know exactly what coverage your company needs without an evaluation. Before you sit down with an insurance agent, meet with us, your Family Business Lawyer™ for an insurance audit.

We can support you by evaluating the specific risks your company faces at each stage of growth to determine exactly what kind of insurance you need and what levels of coverage will best protect your business assets both now and in the future. Contact us, your local Family Business Lawyer™ today to get started.

This article is a service of Sahmra A Stevenson, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. 

Although cash is the lifeblood that sustains every business, far too many business owners fail to properly manage their cash flow. And this is despite the fact that statistics consistently show that running out of money is one of the main reasons new businesses go under.

Trying to run a business without carefully managing your cash flow is like fighting a rising tide: Sooner or later you’re going to find yourself underwater. And even if your business generates healthy revenue, you can still experience the occasional cash crunch—which is especially true during your first few years of operation.

To avoid joining the ranks of bankrupt startups, get smart about boosting your cash flow by implementing these 5 strategies.

1. Get Professional Support

To save money, lots of new business owners try to manage their books on their own, but this is a major mistake. Managing cash flow is too time consuming, complex, and critical to your company’s survival for you to fit it in with all of your other responsibilities. In fact, the very first team member you hire should be a professional bookkeeper/financial manager.

Effective cash-flow management is the foundation upon which all of your company’s financial and tax strategies are built, and it needs to be done properly from the very beginning. With this in mind, even if you’ve yet to earn any revenue, you should consider paying for a bookkeeper out of your own pocket. 

Hiring a highly experienced bookkeeper with whom you can build a tight relationship might require an investment of time and money upfront, but the ultimate payoff in terms of your financial strategy and tax savings will more than make up for the initial effort and expense. 

If you need support in finding the right bookkeeper, work with us, your Family Business Lawyer™ for guidance. We can refer you to bookkeeping professionals in our area we trust most to ensure your company has the proper financial oversight from the start.

 2. Implement Financial Systems

Above all, effective cash-flow management requires sound systems. If your company’s financial systems and processes aren’t set up the right way from the start, even a skilled bookkeeper isn’t going to magically fix them.

As your Family Business Lawyer™, we  specialize in supporting startups to set up effective financial systems. We will help you put the proper systems in place to manage your cash flow and ensure your company has a rock-solid financial foundation that won’t suddenly collapse when the going gets rough. 

3. Closely Monitor Accounts Receivable

Many startups experience negative cash flow simply because they don’t stay on top of accounts receivable. You must ensure that your customers pay you on time and in full. Accounts receivable that go unpaid for too long are more likely to get overlooked and go uncollected.

Your bookkeeper should keep track of all accounts receivable and include them in the monthly financial reports that he or she submits to you. Having these details included in your reports will not only keep you apprised of your company’s financial health, but it can also allow us to better assist you if and when you ever need support with collections.

4. Get Paid Upfront

One easy way to boost your cash flow and eliminate headaches associated with accounts receivable is to have your customers pay their bills upfront whenever possible. This is especially true if you have clients who are consistently late with payment.

If full payment upfront isn’t feasible, even requiring partial payment as a deposit will improve cash flow. To encourage quick payment, consider offering discounts for upfront or early payment. At the same time, have a firm policy in place that penalizes late payments, and make sure your sale agreements clearly spell this policy out—and you consistently enforce it with all late paying clients.

5. Maintain A Cash Reserve

Just about every startup experiences revenue shortfalls. And your company’s survival will likely depend on how you handle these lean times. To shield your company from the inevitable slow periods and unforeseen emergencies, try to maintain a cash reserve—even if it’s just access to a line of credit.

Having a reserve to fall back on will not only protect your company’s financial health, it can also save you from the stress and desperation that comes from unexpectedly running out of money. Nothing will kill your team’s morale—and your company’s growth—more than finding yourself unable to cover payroll.

Keep The Cash Flowing
All the vision and passion in the world won’t keep your startup afloat if you fail to properly manage your cash flow. That said, you don’t have to be a financial genius to keep your revenue flowing freely—you just need the proper systems and support. As your Family Business Lawyer, we can support you with both. 

We will assess your current financial systems and advise you about additional ways you can shore up any weak spots in your company’s foundation. Getting a handle on your cash flow will prevent your startup from running out of money, and it will also free up your time and energy to focus on the big-picture responsibilities needed to ensure your business not only survives, but truly thrives. Contact us today to get started.

This article is a service of Sahmra A. Stevenson, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge.

What To Expect From Your Initial Meeting With Us Your Personal Family Lawyer®

Whether you’ve met with an estate planning lawyer before or it’s your first time, it’s important to understand how working with us, your Personal Family Lawyer® is different from meeting with a traditional lawyer. 

Here we will explain what’s involved with our process, in hopes that it will inspire you to meet with us, your Personal Family Lawyer® and get clear on what your family needs you to have in place, so you don’t leave behind a mess if you become incapacitated or when you die. We promise to help you make the wisest, most affordable, most effective, time-saving plan for yourself and the people you love. 

Meeting With A Traditional Lawyer

Given the unique approach of Personal Family Lawyer® firms, an initial consultation with our firm is quite different from an initial consultation with a typical estate planning attorney. A typical “initial consultation” would be a meet-and-greet-type of meeting, in which the lawyer describes the various legal documents you need to put in place and quotes you a fee to provide those documents.

In those types of meetings, it will likely be quite difficult for you to know exactly what you need for your unique family situation, assets, and how to make the right decision, outside of simply considering whether the cost of these documents fits within your budget. Deciding what you need based solely on the cost of documents will likely lead to you receiving a set of documents that won’t serve and protect your family or your assets when they need the most support.

Unfortunately, we’ve seen it all too often: You have the best of intentions to do the right thing and get a will or trust in place, but you either don’t do it, don’t complete it, or work with a lawyer who puts in place a documents-only plan that is little more than what you could do yourself online through an online document service. And then you become incapacitated or die, and your family is left with a mess: They don’t know where your assets are, they don’t know who to turn to, your documents are out-of-date, and your loved ones are lost, confused, and grieving all at once. 

We’ve designed our entire process, which we call Life & Legacy Planning, to support an entirely different reality—one in which you use the estate planning process to not only leave behind a plan for the people you love, but to make your life even better right now. Let me explain how we do that.

Family Wealth Planning Session™

As your Personal Family Lawyer® firm, our entire process is designed to support you to make the right decisions for yourself and the people you love during your life and to leave a legacy of support and love to the people you care about most. 

In service to that, our initial meeting with you is a two-hour working session, called a Family Wealth Planning Session. During this session, you’ll educate us on everything you own and all of your family dynamics, and we’ll educate you on how the law would apply to you, your assets, and your family in the event of your incapacity or death. Then, together we will create a plan for how to structure your affairs, how you’d like to have your family supported, and how to keep track of your assets, so your family never feels lost, confused, or alone during a time of grief. And by the time you leave the Session, you’ll feel relieved, cared for, and more clear than you’ve ever been about how to make life choices in alignment with the legacy you desire to leave, as a parent, as a business owner or professional, and as the CEO of your life.

This Planning Session is $750. But if you’d like us to waive this fee, we will do so if you are willing to do a bit of homework ahead of time. This homework is a critical part of the planning process, and it will benefit your loved ones whether you engage in a full plan with us or not. The homework will guide you to find everything you own, and document it, using our Personal Resource Map: Family Wealth Inventory and Assessment.

Just completing this initial assessment will likely get you more financially organized than you’ve ever been before.

We are consistently surprised to see that many of our clients do not have a clear awareness of what they own or how to locate all of their assets. And if you don’t know what you have and where it is and you haven’t documented it, how will your family know? This is exactly why there is more than $58 billion (yes, that’s billion with a “b”) of lost and unclaimed assets held by state and federal agencies in the U.S. This happens when you become incapacitated or die, and your family is unable to find or simply overlooks assets you’ve worked so hard to create because most people fail to properly inventory their assets and/ or keep that inventory regularly updated. So we support you to start there.

We know you haven’t devoted years of your precious time and energy to build your family wealth only for your heirs to lose track of it when something happens to you. That’s one reason the Family Wealth Planning Session is so beneficial. Whether you decide to create a full estate plan or just rework the one you have, after working with us, at the very least your family will know what you have and how to locate it should anything happen to you. 

And if you do decide to create an estate plan or redesign an existing plan with us, the Family Wealth Planning Session will guide you to choose the type of plan you want based on your budget, what’s most important to you, what’s not important to you, and with a clear understanding of the impact of your choices. We will guide you to choose the most affordable and effective planning solution for your life and the people you love, so you can get your affairs in order and keep them that way throughout your lifetime and through all of life’s changes

This investment of your time now will save your family countless hours of heartache and work down the road, while also keeping your loved ones out of conflict and out of court. If you choose to work with us, you’ll get the peace of mind that comes with knowing you never have to make another financial or legal decision without our guidance again. And if and when something happens to you, your loved ones will get the same type of trusted advisor, who will be there for them when you can’t be.

Death is unavoidable. But you can make it far easier on the people you love by the choices you make now. And facing the reality of this fact allows you to make choices that will let you enjoy your current life even more. In fact, our clients often report a huge sense of relief after meeting with us, and they frequently say they wished they’d created a life and legacy plan sooner.

Life & Legacy Planning

You see, we’ve discovered that estate planning is about far more than planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning.

As your Personal Family Lawyer®, we are specially trained to educate, empower, and support you to make the right decisions for your life and for the people you love. Furthermore, because your plan will be designed to provide for your loved ones in the event of your death or incapacity, we aren’t just here to serve you—we’re here to serve your entire family. 

In the end, your Life & Legacy Plan goes far beyond simply creating documents and then never seeing us again. We will develop a relationship with you and your family that lasts not only for your lifetime but for the lifetime of your children and their children if that’s your wish. And this all starts with our Family Wealth Planning Session. If you’d like to learn more about this process or schedule your appointment, contact us, your Personal Family Lawyer® today.

This article is a service of Sahmra A. Stevenson, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge.