Let’s imagine that you’ve started work for the day and you get a text from your business partner which says:
“Hi. I really need a break. I’m going overseas today without my computer and phone. I’ll be back in 6 months. Sorry for the late notice.”
And suddenly, it’s all up to you……..
What would you do for the next 6 months?
Of course, a business partner’s random holiday is not an issue that you have to deal with. Those things get scheduled.
But does your business partner have his heart attack, stroke, car accident or death scheduled in their calendar? Is there an Outlook reminder so you can make plans for a dozen difficult issues that are going to become your sole problem to deal with in a death or disability scenario?
Of course not.
- 1Your partner’s family will probably want (and need) to receive payment for their share of the business. And they’ll likely want it inside 3 months. Will you have the money? Because if you can’t pay, your deceased partner’s spouse might force a sale of the business to get their share. In many cases they are entitled to do so.
- 2You will have lost someone who is critical to the operation of the business. What will that do to the profitability of the business? Will it be a bump in the road… or a killing blow?
- 3If you can’t afford to buy out your partner’s share, do you plan to work hard, build the business, increase its value and every month pay half of the profits to your former partner’s family? Will that really work? And for how long?
We have seen so many cases where businesses have been crippled by the sudden, unexpected death or disability of a partner. Sometimes a valuable business has to be sold. And sometimes that sale is forced by the court causing a devastating loss of value.
Would you want to have to start up again just because you weren’t cashed up enough when your partner died unexpectedly?
Could you start up again even if you wanted to?
All of these awful things are usually 100% preventable.
Book a review of your business affairs and business structure today.
Call Your LegalHQ on 9445 9200,
ask for Henry and take control of the risk.
- You might find your partner’s spouse turning up every day to look through the books and “keep an eye” on the place
- Your partner’s spouse may want to attend all meetings about the business
- They might demand signing authority on the bank account (and will probably be entitled to have it)
- Your partner’s spouse might be asking for half of the profit, probably in the form of a cheque every month
- Your partner’s spouse might want to involve themselves in the day to day management of the business even if they have no idea about how it works. It does happen
If your business partner dies or is
disabled, you will be left in business
with your partner’s spouse. Was that
ever the plan?
They also will not necessarily understand what the business is about or how it should be run. They may consider themselves free to a profit allowance every month or entitled to withdraw money from the company accounts as and when they want it.
Although the spouse has to be looked after, they are not someone you want being involved in your business. But they WILL BE INVOLVED if you don’t have a strategy.
Call Your LegalHQ to book a business structure review.
Henry will show you how all these things can be managed
The number to phone is 08 9445 9200
You must take action now. You can do nothing at all once disaster strikes. It’s all
over then. Taking action is like taking out insurance. And everyone knows that:
You don’t think your house is going to burn down But you insure it because it would be terrible if it did..
What will you do when your deceased partner’s spouse asks you to pay
them 50% of the value of the business within 60 days?
Most people don’t. If you do, you probably had a plan for that money. Would paying it out to your partner’s spouse be a temporary setback or permanently de-rail your plans?
Dealing with this matter the wrong way, or making the mistake of doing nothing at all, exposes you to these dangers….
- 1Your partner’s spouse wants to be paid and you probably don’t have the money spare.
- 2You might have to borrow – but will you have the security to give the bank?
- 3If you have the security, will the bank care? After all, your business partner has just been disabled or died. They don’t know if you’re a safe bet right now.
- 4Your partner’s spouse probably has the right to push for a sale of the whole business – what will that cost you?
These things are very stressful and distracting to deal with. Running around to try and get a loan while your business suffers because you’re spread too thin already is hard. If you can borrow, the unexpected debt load will put your business under financial strain at the worst possible time.
And what about the RISK OF A FORCED SALE? Your deceased partner’s spouse might think they have no choice to force a sale. And suddenly, you’re keeping too many ball is in the air, losing money AND PAYING LAWYERS BILLS as you try to save the business which you have either paid for in big money, years of your life, or both.
All of this is 100% preventable.
- Take away the risk and danger and protect yourself and your family by booking a review of your business with Your LegalHQ;
- learn how you can gear up to create a process that you can be 100% certain will protect you when disability, injury or death strikes;
- find out about interest free funding available so you know you can pay out your partner or their estate in a tragedy scenario without the pressure, stress and worry of the risk of a forced sale
The need to come up with large amounts of money when a business partner dies or is disabled is often met by taking out insurance.
But insurance is just the money bag. And by the way….it’s a money bag in the hands of your deceased partner’s spouse. How do you know what they will do with it? Because they still actually own a slice of the business as well. What if they wanted to keep the insurance money and a slice of the business as well?
You can see that merely having the money available is only half of the answer.
The other half of the answer is making sure that the insurance proceeds are properly used to fund the buy-out – that’s the half of the answer that Your LegalHQ has.
Can’t get insurance? Don’t panic. We can still deal with all the issues
and problems that you will face – we’ll just do it differently.
So how can you protect yourself and your family from the risk and damage that these uncontrollable events always cause?
You and your business partners need a custom designed contract that sets out in black and white exactly where everyone stands and what everyone can and can’t do if your partner dies or is disabled.
That contract needs to be prepared by us, after we take the trouble to understand:
- Exactly what your business structure looks like;
- the roles and responsibilities of all the partners; and
- the business’ debt levels and working capital requirements.
In other words, you can’t use a template solution. It is the nature of your business which drives the solution – nothing else.
But what does this contact actually give you?
It will give you the certainty that if your partner is struck down by a tragedy event:
- Your partner’s spouse can’t come in to the business and try and run it, unless you let them;
- Your partner’s spouse can’t take money out of the business unless you let them;
- You don’t have to borrow money in a hurry to buy out your partner’s spouse;
- You don’t have to sell the business in a hurry, split the proceeds with your partner’s spouse and then sit there wondering what to do with your life now
In fact, it will pretty much be business as usual….
You will still have to make sure that your partner’s functions in the business are being
performed, but you won’t have to do it with all the other drama. And by the time you have
met us, you’ll have a pre-made plan for how you will handle that as well.
So What Now?
This is the easy part. Just make it happen.
Call Your LegalHQ and book a meeting with Henry Tham to discuss
your business, and how we can take away the consequences of an
unanticipated partner disability or death.
When we have had our meeting you will know exactly what is required to:
- Protect yourself and your family against the damage that unanticipated tragedy will cause in your business
- Manage your bank and other lenders in the tragedy situation
- Create a situation where you can manage the buy-out of your partner’s share financially, and at a time that suits you.
- Make sure all partners are on the same page, so that then, they can make their own plans confident as to how the shared business asset would be managed in a tragedy scenario
- Successfully fund a buy out using insurance if available, or borrowings or vendor terms as appropriate.
We have also seen cases where our own clients, who have engaged us to deal with the risk of death or disability have successfully absorbed the death of a partner. One company whose documentation we prepared has survived the death or disability of three partners – one after the other.
Place your business out of harm’s way. Turn a partner’s death or disability from a potential disaster to something which, though tragic, is able to be managed. Don’t delay calling Your LegalHQ on 08 9445 9200.
Anyone who owns a business in partnership will agree that their interests need to be carefully protected.
But the thing is, nothing is going wrong right now. People think it can wait until next week, next month, next year… but it just can’t. The risk might be small, but the consequences are dire.
You don’t insure your house because you believe it’s going to burn down. You insure it because it would be a disaster if it did.
We are talking about exactly the same situation here. The only practical difference is you need to put in insurance in place every year. You only need to address this problem with us, once.
Call Your LegalHQ on 08 9445 9200,
for protection, security and the safety of your business.