What Happens to Your Business If Something Happens to You?
Business owners spend a lot of time thinking about what happens inside the business: clients, contracts, employees, revenue, taxes, and growth.
But there is another question worth asking:
What happens to the business if something happens to you?
That does not only mean death. An illness, accident, or other period of incapacity could leave you temporarily or permanently unable to run the company.
If the business depends heavily on you, the legal plan should account for both possibilities.
Ownership and Management Are Not the Same Thing
One of the most important distinctions in business succession planning is the difference between owning the business and having authority to operate it.
For example, a business interest may ultimately pass to a spouse or child after an owner’s death. That does not necessarily mean the person who inherits the economic interest automatically receives the same management rights the owner previously exercised.
For Virginia LLCs, the operating agreement can be especially important. Virginia law generally treats a member’s death as an event of dissociation, while the operating agreement can alter many of the default rules governing what happens afterward.
So “my spouse gets my business” does not fully answer the succession question.
You also need to ask:
Who will have the authority to make decisions?
What Happens If You Are Alive but Cannot Run the Business?
Succession planning should not begin at death.
Imagine a business owner is hospitalized and unable to communicate for several months.
Who can access what is needed to keep the company operating? Who can deal with contracts, financial matters, employees, vendors, or other business decisions? Who has authority to act with respect to the owner’s business interest?
A properly drafted power of attorney can be an important part of incapacity planning. Virginia law permits an agent to receive substantial authority concerning the operation of an entity or business when that authority is granted, but that authority remains subject to governing documents and agreements affecting the entity or ownership interest.
For a business owner, a power of attorney should therefore be considered alongside the company’s operating agreement, bylaws, shareholder agreement, and other governing documents—not in isolation.
Your Operating Agreement May Matter as Much as Your Will
Business owners sometimes think succession planning is simply an estate-planning question:
“Who gets my ownership interest when I die?”
But the company’s own documents may contain important provisions concerning death, incapacity, transfers, management, or buyouts.
Depending on the entity and its governing documents, there may be restrictions on who can acquire an ownership interest, requirements for purchasing an owner’s interest, procedures for determining value, or rules governing who can participate in management.
That means your estate plan and business documents should tell a consistent story.
If your will or trust anticipates one result while your operating or shareholder agreement requires another, someone will eventually have to sort out the disconnect.
Do You Actually Want Your Family to Run the Business?
Inheritance and management are different questions for another reason:
The person you want to benefit from the value of your business may not be the person you want running it.
Perhaps your spouse depends on the income generated by the business but has never participated in its operations.
Maybe one child works in the company and another does not.
Perhaps you have a business partner who would never want to operate the company with your heirs.
Or maybe none of your family members want the business at all.
Instead of simply asking:
“Who should inherit my business?”
Consider asking:
“What do I want the business to look like without me?”
The answer might involve continued family ownership, a buyout, a sale, another owner assuming control, or another succession strategy.
If You Have Business Partners, Plan for the Relationship After You
Your death or incapacity does not affect only your family.
It can also affect the people who own the business with you.
Consider a company owned equally by two friends. One dies and intends for everything to pass to a spouse.
The surviving owner may suddenly have to confront questions neither owner previously addressed: What rights does the deceased owner’s successor have? Should the surviving owner purchase the interest? How is the business valued? Where will the money for a buyout come from?
Those questions are much easier to address while everyone is available to participate in the conversation.
The Plan Should Include More Than Legal Documents
Even excellent legal documents cannot tell someone where your critical business information is located.
A practical succession plan should also consider what someone would need to keep the business functioning.
That may include identifying key professional advisers, banking relationships, insurance information, important contracts, employees or contractors with critical responsibilities, recurring obligations, and where essential business records are maintained.
This does not mean putting passwords and sensitive credentials into a will.
It means considering whether the people who may eventually step in would actually know enough to begin.
Your Business Is Part of Your Estate Plan
For many entrepreneurs, the business is one of their most valuable assets.
It may also be the source of the family’s income, an employer of other people, the product of years of work, and something the owner hopes will continue beyond them.
That makes business succession both a business-planning issue and an estate-planning issue.
The goal is not simply to decide who gets the business.
It is to coordinate ownership, management, incapacity planning, governing documents, and the owner’s estate plan so that everyone is not forced to figure it out during a crisis.
What Would Happen to Your Business Without You?
If you own a business, consider three questions:
Who could act if I became incapacitated?
Who would receive my ownership interest if I died?
Who would actually run the business afterward?
If you cannot answer all three—or the answers depend on assumptions rather than documents—it may be time to review the plan.
Basis Law PLLC assists Virginia business owners with business law and estate planning, including helping clients consider how their business interests fit into the larger plan for themselves and their families.
Schedule a consultation with Basis Law to discuss your business and planning needs.
This article is provided for general informational and educational purposes only and does not constitute legal advice. Business succession and estate-planning issues depend on the type of entity, governing documents, ownership structure, individual circumstances, and applicable law. Reading this article, visiting this website, contacting Basis Law PLLC, or scheduling a consultation does not create an attorney-client relationship. Representation requires a written engagement agreement with Basis Law PLLC.