What You’re Missing from Your Business Plan
Author: Alisa Best, 3L Liberty University School of Law
Average read time: 2-4 minutes
Business formation has been on the rise lately, meaning many have been tirelessly working on their business plans. A typical business plan includes:
An executive summary;
A company description;
Products and services;
A marketing plan;
An operational plan;
Management & organization; and
A financial plan.
And once complete with the business plan, the official process of forming the business begins. This includes, for most, filing the articles of organization for LLCs, and though not required to file, drafting an operating agreement.
The articles of organization is the document that is filed in the State in which an individual desires to form their business in. However, the operating agreement is the document that details how the business is to be operated. But what happens to the business in the event of incapacity or death? Is the business to cease operations? Is it to continue to run? And if it is to continue to run, who is to take over in your place? Do you want to keep it in the family, or do you want to sell it? Your operating agreement and having a comprehensive estate plan can help mitigate these concerns.
In your operating agreement, you can address the duration of the company. In doing so, an individual has the discretion to decide what will happen upon death or incapacity of a member – if the business is to continue, addressing successor members who may participate in the management of the business and who may retain economic interests from the predecessor member. And can also provide instructions on winding up the business. Winding up is the process of dissolving a company and selling stock, paying off creditors, and distributing any remaining assets to members.
With your comprehensive estate plan, there are strategic ways businesses may be transferred or gifted to beneficiaries. Using wills, trusts, and other common estate planning documents can help ensure that decisions that align with your wishes will be made. Wills and trusts can also address instructions of your wishes on how to proceed with the business and how the interests are to be held and passed down to beneficiaries, but it is important that if you addressed it in your operating agreement to ensure that the language matches across the documents. A power of attorney can be help in the event of incapacity as well. A power of attorney is an instrument granting someone authority to act as agent for the grantor. With this document, you can appoint someone to make decisions on your behalf, but with this comes the importance of communication between you and the person you wish to appoint as power of attorney. This communication is important in regards how much authority they have and their understanding of your goals for your business.
Taking these measures to protect yourself and your business, are well worth it in the long run. But don’t forget to update all of your documents as your business grows and/or changes to ensure adequate planning and protection.
Schedule a discovery call today to discuss your business legal needs.
