Consider some of the consequences if you were to die suddenly:
- Would anyone know what to do at the office-which customers or suppliers to call, what to say to any outside lenders?
- Is your will up-to-date, and does it reflect your current wishes on what you want done with the business after your death? Even if you have not decided on any long-term strategy, you should at least have an emergency plan in the event that you were to die suddenly and prematurely.
- Do you know roughly how much capital gains tax would be payable if you were to die tomorrow? Are any arrangements in place to ensure that your estate has enough liquidity to pay the taxes arising on your death?
- Have you explored various tax and estate planning strategies (e.g. an estate freeze) for reducing or postponing the capital gains tax that would be payable as a result of your death?
- Have you considered the use of life insurance to cover the capital gains tax arising in your estate, or as a means of funding another shareholder’s purchase of your shares of the company?
- Who would take over the day-to-day management of the business? Have you been grooming a successor?
- Does your spouse or any of your children have the qualities to take on the top leadership role as CEO? Some managers are good “caretakers,” but have poor leadership skills.
These are just some of the questions that should give you food for thought.
Most business owners have put in too much “blood, sweat and tears” to contemplate the possibility that the business will go down the drain after the owner’s death because of a lack of planning. Where do you start?
Being Strategic in Your Thinking
One of the hardest things for most owner/managers is to step back from the day-to-day affairs of the business and to think strategically. Looking at the big picture is not easy. It means taking off your “manager” hat, and putting on your “owner” hat. Perhaps the manager of the business (i.e. you!) is not doing such a good job any more, and has become complacent. Perhaps it means facing the fact that your son or daughter who is working in the business does not have what it takes to take over the management of the business.
Alternatively, you may not want to admit to yourself that the business is worth a lot more today than it might be in five or 10 years. Therefore it may be more sensible to sell the business now, under an arrangement where you could stay on for a few years under some transition arrangement. But what do you do with your time if you sell the business? You have no hobbies, and the business has been your life!
