Partners Should Plan Ahead For Disability
Originally published: 02.01.12 by Mike Coyne
Agree to protect the business before misfortune strikes.
A short time ago, I received a call from a reader seeking some advice.
He and his partner had operated a successful business for a number of
years. One partner concentrated on the service side of the business
while the other concentrated on new installations. However, the business
began to unravel about 18 months ago. At that time, the partner in
charge of installations was diagnosed with a serious cancer. The disease
was extraordinarily debilitating, and the partner has never been able
to return to work.
During the first few months of his partner's disability, the healthy partner stepped up his efforts on behalf of the business. However, several months of working seven days a week to handle both partners' responsibilities began to take a toll on the healthy partner's family life and his own health. Additionally, because the healthy partner did not understand the installation side of the business, the business began to lose revenue.
The partner who is ill has shown no willingness to step aside and leave the business. In fact, by trying to hold on to authority while he has been ill, he has actually further damaged the business. The continuing decline of the business jeopardizes not only the healthy partner’s livelihood, but also the livelihoods of the business' 12 employees.
Unfortunately, there is no easy solution to this type of problem. We recommended to our reader that he engage his lawyer and accountant to mediate a resolution with his partner. In this case, it is probably necessary for the disabled partner to resign without an immediate buy-out in order to give the business a chance to survive. This won't be an easy discussion.
Dealing with a disabled partner is never an easy matter. Human nature is such that many of us would find it difficult to ask a disabled partner to step aside due to his or her disability. Yet, this is often the only solution.
The question is not how to have the discussion, but rather when to have the discussion. The best time to discuss a contingency plan for a major disability is when both partners are healthy. If you have a partner, you should have a discussion about how you would handle a serious disability, such as the one described in this article. Here are some ideas that might help you plan:
• Have a written agreement that your compensation from the business will automatically terminate if you are unable to work on a full-time basis for X number of days within any six-month period.
• Purchase disability insurance. If you and your partner have disability insurance, you will have some assurance of an income stream in the event that you are unable to work.
• Take the time now to learn each other's side of the business. Identify key employees who can assist you with the other side of the business in the event that your partner becomes disabled.
• Have an agreement to sell your interest in the business to your partner if you become totally and permanently disabled.
Having a plan in place to deal with a partner's disability is good for the business, the healthy partner, and the disabled partner. Everyone benefits from the planning.
Articles by Mike Coyne
Spotting Legal Land Mines in Your Social Media Campaign
Your responsibility extends to third-party contributors such as customers and friends.
4 Ways To Avoid Discrimination Claims Related to Hiring
Be aware that a person can sue you even before they become an employee.
Hiring a Veteran Has Benefits
As the United States brings home soldiers from the Middle East, military veterans comprise a larger percentage of the labor pool. A number of government programs have been implemented to provide incentives for employers to hire veterans, and special incentives are available for employers who hire disabled veterans. Is this something you should consider?
Address Texting-While-Driving Head On
This theory of liability applies when employees are acting within the scope of employment or for the benefit of employer.
Keep Corporate Debt Separate from Personal Debt
If you are operating your business in corporate form, it is important to follow formalities. You should sign contracts in your capacity as an officer, and contracts should always be between your corporation and the other party. You should never be named as a party to the contract.