Prudent Purchasers Should Examine the Title to Their Property (Continued)July 21, 2012
Estate Planning is Essential to Your Family Business LegacyOctober 20, 2012
People go into business to succeed. While there are different driving factors which cause people to go into business – for example, financial motivation, a passion for business, or having expertise in a particular field – nobody goes into business to fail.
Why, then, do some people go into business and not prepare for the worst? There are a number of reasons for this lack of preparation, however, many of those reasons lead back to a lack of knowledge and experience.
One of the issues of prime importance for any business is the continued financial stability of that business. Two very common events which often have a negative effect on that financial stability are a breakdown in the relationship between business partners and divorce. In both cases, steps can be taken before there is a problem, to ensure the continued financial stability of your business and to allow the business to carry on as a going concern.
If you are in business with other individuals, it is very important to have a plan in place dealing with exit strategies for one or more of your partners. An exit strategy contemplates one of the individuals in the business leaving voluntarily or being forced to leave either by circumstances or by the remaining business associates. Within a partnership, this plan can be outlined in a Partnership Agreement; in a corporation it is in a Unanimous Shareholder’s Agreement. Both Agreements can outline the plan to deal with any number of situations which could occur and which would result in one or more of your partners leaving the business. The Agreement should outline circumstances which would trigger a buy-out (for example a partner going to jail, dying, losing mental capacity or getting divorced), how a purchase price would be fixed, and how payment is to occur.
This Agreement is key to ensuring the continued viability and ongoing success of your business despite what could be a very difficult and potentially financially disastrous event occurring.
One of the most difficult challenges facing a business is when one of the business partners goes through a divorce. Whether you are in business on your own, with other people, or with your spouse, a divorce has the potential to financially ruin your business.
Most people going through a divorce find it to be one of the most stressful times of their life. This often results in people making poor decisions. If these poor decisions affect your business, the results can be disastrous.
If you are in business with others, an Agreement, as discussed above, is the best way to prepare for the possibility of the divorce of one of the business partners. If you are in business with your spouse, the breakdown of the marriage also leads, in most situations, to a breakdown of the business relationship. In those circumstances, it is very important for you to have a team of professionals to ensure the continued success of your business. An accountant, an experienced business lawyer and an experienced family law lawyer are three key people to have on your team.
While it is very stressful and often creates financial burdens when a partner leaves a business, it is reassuring to know that, with the right planning and expertise on your team to help you navigate this turning point in your business life, you can arrive at your destination with your business protected and wealth preserved.