What Happens to Your Business if You Get Sick or Pass Away?

By Senior Associate Jeneva A. Vazquez

As estate planning attorneys, we often receive calls from the family members of small business owners after the owner has become incapacitated or passed away. These conversations are emotional and stressful, and without proper planning, a business can quickly become tangled in legal red tape, disrupting operations and harming its value.

If you are a solopreneur or small business owner, estate planning isn’t just personal—it’s a business necessity.  If you are suddenly unable to run your business due to illness or injury, business operations can come to a halt in a matter of days.  Without a valid power of attorney in place, no one—not your spouse, family, or team—has the legal authority to access business bank accounts, sign contracts, or make payroll.  Incapacitation can jeopardize your employees’ paychecks, your clients’ trust, and your company’s survival. With a plan in place, you can designate someone you trust to step in and keep things running smoothly if you're ever unable to do so.

Another common issue arises when trying to prove business ownership after death. Unfortunately, family members are oftentimes left with documentation that rarely provides the level of detail needed to prove actual ownership.

Sometimes when people form an LLC, the Articles of Organization filed with the Secretary of State’s office will list out all the owners, but not always, and in those cases where they are not all listed, an operating agreement is needed.  However, if your business is a corporation, the owners are NEVER listed on the Articles of Incorporation.  The business must issue share certificates or the owners must enter into a shareholder agreement to show ownership, and we find that frequently does not happen.  Without formal documentation of ownership, survivors may struggle to access accounts or make critical decisions.

Additionally, these same formal business documents help protect you during your lifetime from business liabilities, so it’s really important that businesses are set up properly.

Finally, as a business owner, meeting with an estate planning attorney is important in order to help keep your business interests out of probate when you pass away.  Probate can delay business continuity for months or longer. During that time, no one may have the authority to access business funds or formally transfer ownership.  Probate is also a public process, meaning sensitive business information can become part of the court record. Using trusts can allow your business interests to bypass probate and ensure a quicker, more private transition in line with your wishes.

At our firm, we help business owners like you create custom estate plans that reflect your goals and protect what you’ve worked so hard to build. We also help you proactively set up the legal foundation of your business.  Contact Jesson & Rains to help you secure your business, your legacy, and your peace of mind.  While You Build, We Protect.®