Mainstream Business Continuity Planning
In many circles, Business Continuity Planning (BCP) is what organizations (partnerships, limited liability companies, corporations, and government agencies) do to ensure that internal and external “threats” (i.e. storms, power outages, data destruction, crime, etc.) are planned for and that specific instructions are in place to minimize the impact of threat becoming reality. In depth BCP of this sort is usually reserved for large corporations with multiple facilities around the nation or world and is typically used in connection with data and information systems and disaster recovery. (See: http://en.wikipedia.org/wiki/Business_continuity_planning)
Legal Business Continuity Planning
At a foundational level, the definition of “Business Continuity” in legal circles is much the same as the mainstream. In other words, Business Continuity is a roadmap for ensuring that your business will continue to function despite the “threat” (to borrow the term) of some disastrous occurrence. In legal Business Continuity Planning, “threats” are different in nature but are no less impactful on the day-to-day operations of your organization. Some examples include: 1) death of a partner or member; 2) retirement of a partner or member; and 3) divorce or other change in family status. And while this list is not intended to be exhaustive, it shows that there are very real, everyday things that can greatly impact the operation of a small business.
This begs the question, “How do I put a ‘legal business continuity plan’ in place?” The following is a list of things you can do, and I will discuss the benefits and drawbacks of each in future posts:
1. Include your intentions with respect to what happens to your business in your Estate Plan. *This should not be a sole means of establishing business continuity.
2. Have an Operating Agreement in place for your limited liability company (LLC).
3. Include lifetime Buy/Sell provisions in your Operating Agreement. This should be part of any operating agreement, but . . . that doesn’t mean it always is.
4. Establish a stand-alone Buy/Sell Agreement and life insurance policies to fund the buy-out. There are many intricate details involved in this type of solution.
It is recommended that whatever your business situation, hire a qualified attorney in your geographical area to advise you on your continuity plan. While you may save a few bucks by doing it yourself, almost invariably you get what you pay for.
Next Week: Business Continuity provisions for your Estate Plan.
DISCLAIMER: This website is for Informational Purposes only. The information provided is not comprehensive, does not constitute legal advice, and does not create an attorney-client relationship. If you need legal advice, please contact an attorney in your local community or State.