Your spouse promised to stick with you for better and for worse. But that might not be enough for business owners.
A business owner needs to plan for the inevitable and the unexpected – for the fact that the owner may not always be there for the business. Death. Disability. Retirement. A business owner cannot count on a spouse to see the business through one of these or any event that takes the owner out of the picture. You need to have something more comprehensive for a few reasons.
# 1 Your employees may not stick around to see what happens. It’s true: Employees like stability. They like to know and to see. If employees see control of the business is changing — even if the owner’s spouse takes over — they may worry about the future and whether the business will survive.
# 2 Your spouse may not have the right skills. Many estate planning lawyers will encourage a business owner – planning for death – to pass the business interests to the spouse. This keeps the company in the family. The spouses, however, may have different management styles. Employees, vendors and other interested parties may see the difference quickly, and their attitudes toward the business may change when they must deal with someone new.
# 3 The spouse may not be able to run the business. The business may end up dying after this attempted change of control. The spouse may be unable to meet the contracts, and grow the business, and provide stable employment. You need a more comprehensive plan. If you can’t simply pass the interest to your spouse, what do you do? How do things more forward?
This is when comprehensive planning is crucial. The plan relies on people who are involved in business — whether that be the spouse, directors, other officers, other family members, or other people that the owners trust. They need to understand the business involved.
The real risk when an owner leaves the business is that unique knowledge and skills are lost too. The plan needs someone who can step up to continue and grow the business. This means distributing the information. It also means getting checks and balances in place to ensure one person doesn’t have too much control and too much authority.
These are complex issues, and no two solutions are the same. Start with the knowledge that simply having your spouse ready to take over the ownership interest isn’t enough. You need something more. Join us in the comments below and let us know about your planning. How have you worked through this situation? How have you involved others in your business?
Make sure you download our free checklist to assess your business: www.mcbrideforbusiness.com/BlogGift
This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer Josephine Eber.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment (www.rshawnmcbridelive.com/3laws), gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can reach R. Shawn McBride at email@example.com or (214) 418-0258.
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