Activated: What Happens to my
By Dick Yemm
Being activated has been an age-old
concern of military members, especially those in the Reserves and
National Guard. Many a soldier has lost their business that is left
to flounder with the advent of extended active duty deployments.
Their stories can be heartbreaking. Resulting family bankruptcies
and the stress disrupting family units are not the rewards due
someone fulfilling a patriotic commitment.
Let’s consider your options as time
becomes a critical element. You can either shutter the doors hoping
to pick up where you left off, close the business never to open
again, sell it for distress value or implement your contingency
plan. With adequate planning most companies can survive and even
prosper until the soldier returns.
Today’s massive global communications
capability provide an owner opportunities never available to prior
generations. Email, the Internet with web-cams and phone cards give
the soldier 24/7 access to their company and advisors equal to that
of a senior executive of any major corporation. Granted, there are
still times when certain operations may limit an individual’s access
to the frequent use of these capabilities.
The basics for setting up one’s company
is similar to developing any business succession plan. In essence
you want to organize your company to operate as any absentee owner
would do. The number of owners in the company and what role each
performs is important. A one-owner single employee business
certainly has a greater contingency planning challenge than a
company with multiple owners and employees. Accepting that each
company is unique, the following guidelines are general in
application. Individual legal and tax issues need to be reviewed by
your respective professionals for those areas.
As a minimum every owner needs to have
the basics of any estate plan. A limited power of attorney (durable
for those states whose statues provide for one) should you be
incapacitated and a will should you die. One gives authority to a
personal representative to manage your personal assets during your
absence or incapacity while the other takes effect in the event you
die. Everyone should have these whether they own a business or not.
The JAG office will be able to help.
The approach used in drawing up a
contingency plan is similar to that employed when drawing-up any
operations plan. You first define your objective. In this case you
are creating a plan to operate your business for a temporary period
of time during your deployment. What separates this planning from a
succession plan is that it is temporary in time. A succession plan
implies a permanent transfer of management and/or your owner
interest. Good business planning dictates that a succession plan be
created while you are developing the contingency plan.
The stated objective of your plan is to
protect the survival of the business without creating a competitor.
In a contingency plan you need to distinguish the fact that you are
transferring management authority, not your ownership interest. This
can be done using three distinct parts.
First is the legal part wherein you give
someone legal permission to act for you. This can be accomplished in
a contingency plan through a limited or general power of attorney
depending on your preference as determined through discussions with
your legal counsel. Be careful about to whom and how much authority
you want to give your personal representative. You may want to
divide the oversight authority giving limited power to several
people. For example you may want to give limited powers to your
spouse or close relative for your personal assets while giving
operational oversight of your business interest to a partner or
The bottom line for appointing anyone to
these positions is Trust. A word that is easy to define but
in many cases hard to fulfill. Appointed spouses, relatives or even
the closest of friends have been known to run off with the cookies
when the lid to the cookie jar is left open. You can achieve your
basic protection through diversification of control and limited
Today you have a tremendous advantage
over deployed soldiers of prior generations through the capability
of global communications. Part of your operations plan, the second
distinct part, is determining how involved you can be in the
business’s operation even if you are on the other side of the world.
The amount of oversight you want to have
will be limited by the co-operation of those you depend on for
supplying your desired information, the parameters associated with
your military job and your access to the communications net. For
example, you can track the success of your business by having
emailed weekly a list of new and finished jobs, monthly bank
statements, changes in employees, or whatever else you need to see.
Though costly, you can have a forensic audit done to ensure the
authenticity of the reports being sent to you.
When designing your contingency plan you
first need to list all the jobs you perform. You now have your
personal job description. This is operationally what you are
temporarily trying to replace. Very key to the implementation of
your plan is the person or persons you choose to be your successor(s)
in management. Care must be taken to ensure that you are only
positioning a substitute, not creating a competitor. There are
several ways that might help.
One way is to split the management job
you have been doing among several people. This diminishes the
control and influence any one person can have on the business. A
long- term benefit is that you are creating diversified management
that can contribute to larger growth as you rejoin the company.
Another way is through a non-compete
agreement. Best use of this is if you are hiring one person to
replace you. These agreements are hard to enforce and normally the
damage has been done by the time you can have it enforced. A
suggestion that makes sense is to utilize a specified
substantial dollar penalty for infringement - in essence an amount
equal to the value of your business. Legal costs to get a judgment
on a debt collection are substantially less than trial costs to
establish damages and their value plus collection costs.
Create a list of potential candidates.
Consider family members, friends, employees (your own and those of
competitors), or a professional from a temporary employment agency.
There are plenty of retired executives looking for a short-term job.
Draw up a list of qualifying
requirements. Define desired character traits. Does the candidate
have the necessary education and required licenses? Do they share
your vision, goals and strategy? Most importantly, are they
available for the time you need them? Your list of qualifying
questions should be detailed and extensive. Don’t forget to
negotiate your success’s compensation up front. Think about
setting-up an incentive package for them to grow the business. They
may show you a new wrinkle.
The final part of your contingency plan
is detailing operating information you think is necessary for your
appointed successor to perform the job. Limiting the information to
“need to know” is another means against creating a future
one must remember that there is more than one potentially good way
to pass on a business. Only one way is guaranteed to fail - doing
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