Many of our clients have small businesses. Some may be the sole owner, or only have a few other people involved in their organization. So what happens if the principal person that is running the business suffers from some type of disability or dies? What happens to the business?
Planning ahead to make sure that employees and vendors can still be paid, that receivables can still be collected, and that work can still be done may mean the difference between the business staying in business, or closing the doors for good.
Who has access to the business checking account is just one part of business succession planning.
You may be able to set up personal accounts as “Payable on Death” accounts, or “Right of Survivorship” accounts, so that on your death you can make sure that someone has access to the funds on those accounts. But when you have a business conducted under a legal entity, like a Limited Liability Company (LLC) or a Corporation, just because a Member, Shareholder, Officer, or Director dies, doesn’t mean the entity dies. You cannot have a “Payable on Death” account for an LLC or a Corporation. That means that if you want to make sure that someone can access the funds in the account, they need to already be a signer on the account.
If you are incapacitated, you may have Powers of Attorney (medical and financial) that allow you to name an Agent to make medical and financial decisions for you, personally. However, those Powers of Attorney will not usually allow your Agent to act for you in your role as an officer or director of a business entity. Again, that means that if you want to make sure that someone can access the funds in the account when you are incapacitated, they need to already be a signer on the business account.
Take some time to think about and prepare a succession plan if you have a business.
If you have any questions, please give us a call.