What documents can you use to avoid disaster For a limited liability company, which is the most common business entity used today in Florida, the document that alleviates problems caused by the death or incapacity of the company’s owner is an operating agreement. Even if the LLC has only one member or owner, the operating agreement can act like a Will for the business. My article titled Do I need an operating agreement for my Florida LLC on LLC operating agreements is a quick read and contains helpful information about those.
For a corporation, the bylaws and shareholder agreement should contain continuity provisions specifying who will take over in the event of the demise of the owner. In Florida, the LLC has eclipsed the Inc. as the preferred business entity because only one governing document is needed as opposed to two. Also, the protections are the same but the management and documentation requirements are less for the LLC. My article entitled Which is better the Inc. or the LLC discusses the differences between these two types of entities in more detail. What can I do to prepare for a transition In addition to having properly drafted governing documents like an operating agreement prepared by your corporate lawyer, a prudent measure is to develop a transition plan. The operating agreement will say who takes over, but the internal transition plan will tell that person what actually do. This transition plan is similar to what you would prepare for any disaster response. But this transition plan must be balanced against the needs of the business to protect its proprietary information.
To put it in other terms, the operating agreement is like telling everyone concerned that person X gets everything in your safe. The transition plan would tell person X how to open the safe. What is a business transition plan and what should be in it A business normally has clients, vendors, and may have employees or independent contractors. The client and vendor information may be confidential or even a trade secret. The business may have other trade secret information, tr