Am I covered if my business partner is incapacitated?
Business is running smoothly, and you and your business partner have an amazing working relationship. You’re dealing with day-to-day tasks, forecasting results, and anticipating challenges to your business. It is probably the last thing on your mind to plan for what you would do if something were to suddenly happen to your business partner.
If you don’t have legal documentation in place to determine what would happen in the tragic event that your business partner was to die or become permanently incapacitated, there could be significant negative impacts to your business and to your personal relationship with your business partner and/or their family.
With enough foresight and the necessary legal agreements in place, some anguish and disruptions to your business can be circumvented.
What are the possible damaging outcomes for my business?
Unfortunately, without legally documented agreements in place, the death or incapacitation of a business partner can have disastrous consequences for your business.
- You may not have insurance in place and be unable to pay their share of the business to their estate.
- You may be unable to find a replacement for their role and responsibilities, resulting in the closure of your business.
- Insurance may not be adequate to cover your partner’s share of the value of the business, their share of any debt that the business is carrying, capital gains tax, GST as well as many other unforeseen costs.
- Life insurance that you intended to use to pay for their share of the business, may instead be paid to other beneficiaries.
- Their family members may have different expectations to you about their ongoing role in the business.
How can I protect my business and all parties involved?
In the unimaginable circumstance that your business partner dies or is permanently incapacitated, best practice is to have in place legal partnership agreements and formal succession planning drawn up by a legal professional.
You should address the following throughout the process:
- Have a legal partnership agreement drawn up which formalises the rights and obligations of two or more people who are going into business together as partners.
- Methodical succession planning and clear processes to follow are well-documented and drawn up by a legal professional.
- All parties involved will require an up-to-date Will and estate plan that outlines plans for their business interests.
- Ensure sufficient insurance is taken out and legal documentation is drawn up outlining how that insurance is to be managed.
- Arrangements are made to pay out an estate or family members expediently.
- The process for valuing the business is clearly outlined and documented.
- Taxation, such as capital gains tax & GST is taken into consideration.
How we can help.
It is important to have a legal professional draw up these items for you:
- A legal business partnership agreement
- A formal succession plan for your business
- A legal Will or estate plan
Our legal professionals can help you draw up a business partnership agreement to ensure that each partner knows their rights and responsibilities. It will also define policies for what should happen in this worst-case scenario.
Our succession planning experts can help you ensure that you retain financial security and minimise tax liabilities during the transfer of ownership or management.
We can guide you through the Will & estate planning process, answering any questions you may have along the way, giving you the confidence that you will be leaving your business and family secure.
We have vast experience in business valuations that take into consideration all aspects of your operations.
If something has already happened to your business partner without legal agreements in place, we can also offer legal advice.
With some forward planning and formal legal agreements in place, some distress and interruptions to your business can be avoided in the heart-breaking event that something were to happen to your business partner.
Take control of your future today by meeting with the Geelong-based Legal team at The Hrkac Group. Call us today on 03 5224 2366.
A couple of new funding initiatives for Victorian businesses have been announced by the Victorian government recently.
There have also been updates to Workcover’s COVID-19 reporting regulations.
Here’s a brief outline of each of these updates:
Small Business COVID-19 Hardship Fund
The Victorian Government’s Small Business COVID Hardship Fund will assist eligible small and medium businesses with a grant of $10,000. This includes employing and non-employing businesses.
To be eligible, your operations must have been severely impacted by COVID-19 restrictions that have been in place since 27 May 2021; you must have experienced at least a 70% reduction in turnover because of the COVID-19 restrictions; you must have been ineligible for other key COVID-19 Victorian Government business grant programs that have been announced since 27 May 2021.
To learn more, see this link.
Business Costs Assistance Program Round Three 12 August 2021 Top-Up
The Business Costs Assistance Program Round Three 12 August 2021 Top-Up from the Victorian government offers further support to eligible small to medium businesses in sectors affected by metropolitan Melbourne’s current restrictions.
An automatic payment of $2,800 will be made to successful recipients of the Business Costs Assistance Program Round Two or the Business Costs Assistance Program Round Two July Extension that operate a business in metropolitan Melbourne.
This payment will be processed and paid automatically.
To learn more, see this link.
Mandatory COVD-19 reporting under WorkSafe Regulations
Under extended WorkSafe regulations, businesses are required to report a confirmed diagnosis of COVID-19 within the workplace, and if that person has attended the workplace within the relevant infectious period
A failure to notify WorkSafe can lead to heavy fines.
To learn more about your obligations to report confirmed positive cases of COVID-19 relating to your employees and contractors, see this link.