Do I Need A Contingency Plan?
Contingency Plan in Spokane
Do I need a contingency plan in Spokane? Succession plans are usually designed to accomplish the owner’s goal of transferring ownership and management responsibility to the successor during the owner’s lifetime. However, a sound succession plan must also provide a contingency plan in the event an owner’s premature death or disability forces a transfer before the intended successors are ready So, yes, you do need a contingency plan in Spokane or wherever you operate your business.
The contingency plan answers the question “What would happen to my family and the business if I am not there tomorrow?” Because it is planning for the present, it must be monitored and updated as the owner’s situation changes. For example, the contingency plan for an owner with very young children and a wife uninterested in the business might be to sell the business at the maximum possible amount to provide funds for the family. As that owner’s children grow older and show interest in the business, the contingency plan may evolve into transferring management responsibility to a key employee and ownership into a trust until the children are ready and able to take over.
As far as the business is concerned, the contingency plan in Spokane must identify the person(s) who would assume management responsibility if the owner were suddenly unavailable. Often this is a key employee who is already very familiar with and involved in making management decisions. If the owner has a child that may someday be able to assume management responsibility, the plan may call for an interim manager until that child is ready. In that case, the plan should also include a way to objectively determine if and when the family member is ready to take over.
The contingency plan should also provide for the owner’s family in the event he or she dies or becomes unable to work. Typically, this is accomplished as a part of the estate plan and includes deciding whether or not the business should be sold, and who is to become the owner if it is not sold. It also includes providing liquidity to the estate and heirs.
Critical steps for designing a contingency plan in Spokane are:
- Review the owner’s will to ensure that business ownership is transferred appropriately in the event of his untimely death.
- Determine the family’s liquidity needs in the event of the owner’s untimely death or disability.
- Identify possible interim managers if the plan is to wait until children (or other designated successors) are prepared to assume management responsibility.
- If the business has multiple successors, consider a buy/sell agreement that addresses ownership succession in the event of any of the owner’s deaths. Review any existing agreements to ensure that the result of a triggering event fits the owners’ needs.