Disaster Planning for Your Practice or Business
Imagine it happens to you, the business owner – Suddenly and unexpectedly you are out of the office for an extended period of time or permanently. What if it was a key employee instead? You know, the one key employee that you point everyone else to for information and that you personally rely on to make sure all those (100 or so) other things that are required to run the business on a daily basis happen. Can your business survive? Everything affecting your livelihood, your family’s financial security, your employees and their families future may come to a screeching halt unless…you have a plan.
Disaster planning is the term sometimes used to look at situations where a tornado, flood, hurricane or all three hit your business location forcing you to retool and make sure you have your information backed up and safety measures in place for your team. However, it may be a more fitting term for when it comes to something happening to you as the business owner or to that key employee. Whether it is disability, personal reasons or death, you need to go through a planning exercise, document a contingency plan and the information needed for someone to hold it all together and preserve the business in case one of those events occur.
A few key items to consider as part of your business owner disaster plan:
- Information and Office Procedures – Consider what information someone would need to keep the business running and then make sure it is documented and updated periodically. What are the passwords? Who is the IT vendor? Where does the company hold payroll accounts? Is there a line of credit available for short-term needs? Make a checklist.
- Company Actions – If you aren’t there, then making sure the company has legally appointed your next key person or persons to have authority to keep everything moving. Without it they have to go to your estate documents or worse, to court.
- Specific Directions – The best way to sometimes consider the what-ifs is to take out a piece of paper and start writing. If something happened to you or that key employee what would be Step 1? Step 2?
- Buy-Sell – If the disaster is one that is going to continue for some time period and you, the owner, are not going to be able to work any longer, make sure there are some contingency agreements in place with other owners, key employees or even other businesses. These legal documents will allow you to be bought out in such event, preserving the value of your business and allowing the needed transition.
- Estate Plan – If it is your business, then it is an asset that needs to be dealt with properly under your estate plan. Does your Will or Trust cover how things are to be done with the business properly and does it complement the above items you have put in place?
- Team – Your key advisors, CPA, attorney, banker, financial advisor, etc are going to be invaluable in the event something happens. They hold history, details and why things are setup in certain ways and where things are going. Make sure these relationships are strong and knowledge is shared on an ongoing basis.
- Communicate – Tell your spouse. Tell your attorney. Tell your CPA. Tell your key employee. Tell your mailman. Well, maybe not that last one, but you get the idea. Make sure people know you have a plan and if they play a part in it. If they know where to go and what they have to do when an event occurs, that disaster in your life may not end up being that disaster that brings down the company after all.
NC Planning’s attorneys are licensed to practice law in NC. The information herein is not legal advice and does not create an attorney/client relationship. The information is in the form of legal education and is intended to provide general information about the matter. The above is not, nor is it intended to be, legal advice. Oftentimes there are significant and important facts and timelines that if known could significantly change necessary course of action. NC Planning strongly advises an individual with questions to confer with an attorney in their state in order to ensure proper advice is received.