As a small business owner or partner, you may wonder what would happen to your business should anything happen to you. How would your family cope with the loss of income? What about your employees and their families? You may feel you have the answers, but before you take that leap of faith, take a look at these common myths and consider a reality check.
If I Die, My Spouse Can Run the Business
Reality check: In many cases, the spouse neither wants to nor is capable of running the company, regardless of what is discussed while both parties are still alive. Small businesses often are dependent on the marketing, technical or managerial skill of the owner. Take that away and the business may fail.
My Death or My Partner’s Death Will Not Financially Impact the Business
Reality check: Each owner of a small business usually makes a very specific and important contribution to the business or has a special skill that is hard to replace. When one owner dies, the surviving owner may have to scramble to keep the business afloat, find a suitable replacement and keep funds from being wasted in the process. Other issues may arise should surviving family members choose to participate in running the business or seek compensation for their share.
A Competitor Will Buy the Business
Reality check: Possibly, but this may not happen to the advantage of the surviving family. The competition may be either looking to take customers away from the business, purchase equipment and inventory cheaply or buy the business at a low price.
A Key Employee Can Run the Business
Reality check: Maybe so, but if the employee is truly running the business, he or she may require a salary com¬mensurate with the added demands of the job. And what happens to the income for the surviving family, not to mention the salary commensurate to replace the employee’s previous position? The funds needed to recoup from such a loss may be more than the business can bear.