I read somewhere that over the next number of years, at least one in every four small businesses will be sued or threatened with a lawsuit. The odds are great that it will come from within the company.
Will your death, disability, or withdrawal cause a dispute? In many cases it can come from not having communicated the exit or transition plan for the company.
Your Corporate Board of Directors
The Board of directors in your company is crucial to the short and long-term success of the company. The board helps in the avoidance and resolution of disputes. The board can help direct the company’s planning, officer selection and the compensation. The board can help in dispute avoidance, dispute resolution and overall corporate management.
Disputes, can come from compensation agreements, benefits, health co-pays, benefits paid. These are many other ares which a dispute can occur. The hope is that there is a board of directors to help with the resolution.
When the owner dies, becomes disabled or just wants out of their business, and there is no business continuation or a buy and sell, the risk of a dispute rises. A buy and sell agreement will establish the rules in the event a trigger that sets off a change within the business. Remaining partners will need to know what the value of the company stock will be sold for. The surviving family will need to know what the value of the business is and what the family expects to do with the company values. Without a solid written plan, there are unanswered questions and confusion.
The best advice
Get things down on paper with all parties agreeing and signing on. Suggestion would be to make the spouses a party of the signing of the agreement in order to understand what the agreement says.
We like to have annual reviews with our clients to review their future plans, to renew what we have done as a team to commit to that, and any suggestions to stay committed and I track. We also have a yearly benefit review and conversation with your employees, partners, and other significant employees to outline the future of the company and your plans.
This is fair to the key people in your company who are making it profitable. By letting them know what your plans are in the future, it gives them the chance to plan their financial future also.