What happens to your out of home company if something happens to you? This is a huge consideration for you if you have a small out of home company and your spouse is not active in the business. Here are three musts for a good succession plan.
A Will
If you don’t have a will specifying who inherits your your out of home company when you die, your out of home company will be tied up in probate. Probate is the court mandated rulemaking which your state uses to determine who your inheritors are and how assets should be disposed. This can be expensive. You need to hire an attorney to file with probate court. The court charges a filing fee is typically in excess of $1,000. Your company will have to pay for a court-appointed trustee to windup affairs of your out of home company. Probate can take years to settle.
Key executive life insurance
This is especially important if your out of home company borrows money from a bank or private lender or has outside investors. Key exec insurance can pay off the lender or outside investors on your death. This means that your out of home company goes to your heirs free and clear of liens. Billboard Insider is aware of two situations where founders died unexpectedly but key exec life insurance paid off the secured lenders, making it much easier to sell the company.
A letter of instruction
Who will run your out of home company if you die? Do you want the company to stay independent or to be sold? Who should handle the sale? If your spouse is not active in your out of home company draw up a letter authorizing an out of home broker or banker or another out of home executive you trust to operate your business and conduct a normal course of business sale to generate proceeds for your estate to distribute. Make sure the broker or successor gets a copy of the letter. Meet with them periodically to make sure they know what’s going on at the company and what you’d like them to do if something happens to you.
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