If there’s one disruption sure to give small business owners nightmares, it’s the death of the proprietor.
But it’s a prospect that they need to consider if they intend to properly serve their customers and the broader public.
Advisor magazine recently reported on an email from the Ontario Securities Commission to chief compliance officers and heads of registered firms, reminding them of the need to establish formal written plans for significant business disruptions.
“For small firms and firms with few registered individuals, it is particularly important for the business continuity plan to reasonably address the impact to clients and business operations in the event of the death, incapacitation or prolonged absence of key individuals,” the regulator said in the email blast prompted by the collapse of a $100-million Toronto hedge fund, which was itself precipitated by the unexpected death of its founder.
The financial industry isn’t the only one with this issue. I have written before about the value of succession planning for lawyers in sole and small-firm practices, as well as some ideas for the Law Society of Ontario to consider in its quest to improve compliance among its licensees.
In my experience, surprisingly few have even considered what would happen to their client files and records if they were unexpectedly unable to continue practising because of an accident, incapacity or death, let alone started the process of drafting a formal succession plan.
But the failure to do so could be damaging not only for the clients who lose out due to missed court appearances, collapsed deals and inaccessible trust funds. Their own family and friends could also be caught in the fallout if the licensee’s estate ends up being on the hook for the firm’s liabilities.
Whatever your profession, once you are ready to turn your mind to succession planning for your small business, it’s also the perfect time to think about getting a broader estate plan in place, so that they can be fully integrated.
The more complex your assets, the more work it will take to maximize the tax efficiency of your estate. But with the assistance of a good lawyer and accountant, you can put together an estate plan tailored to your individual situation.
Disclaimer: The content on this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this website are advised to seek specific legal advice by contacting members of Laredo Law (or their own legal counsel) regarding any specific legal issues.
