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Continuity: Why Estate Planning is Good for Business?

25 November 2022 - Canada 2 min read

The worst nightmare for an entrepreneur is getting sick. Not the sniffles – really, truly, sick. Not only are there no sick days when you own and operate your own business, but there are also often no long-term contingency plans. And when there is, someone still needs to be empowered to make decisions on your behalf. That is where proper estate planning comes in.

Estate planning is more than just a will for when you die. It includes documents for when you’re still alive and unable to make decisions for yourself and your business, such as powers of attorney and personal directives. If you can’t sign the cheques, who does? Who makes important decisions on business items during periods when you are incapable? Is there a backup plan?

It’s easy to put off drawing up a will as most people prefer not to think about their fallibility. Those that do have one often discover it’s out of date. Sometimes people forget that they have named a person their attorney or executor, and that person is no longer part of their life. For many reasons, periodically reviewing your estate planning documents is essential, especially when you experience substantial life changes.


The most common part of an estate plan is a will. Your will must be clear about who is to run your business after you die, for instance, your executor or someone else, and what to do with your shares. In estates that take time to settle or contain trusts that will run for years, it is crucial to delineate who is in charge and what they are to do with the business. Do they sell it or keep it for a minor beneficiary? Should they wait until a specific time or sell the shares to other remaining shareholders or another individual? These questions should be answered in your will, subject to existing restrictions if any. 

Enduring Powers of Attorney

For business continuity, powers of attorney are vital. The person named must know they are to step in should you not be able to act or make decisions. Closely held businesses which depend on many fast-paced decisions by a small team or individual need clear seconds in command, including the legal authority to take that role.

Even if the business is more informal, an untimely accident could throw a wrench into deal negotiations or large transactions, including the sale of the business. Ensuring someone has the legal authority to act in the event of an accident or disability can save what otherwise might kill a deal.

Key Person Insurance

If one person, or a handful of key people, drive the value of the business, you should evaluate the need for Key Person Insurance. Policies range in coverage and benefits, but generally, they cover the death and disability of the key person.

Key Person Insurance can help a business in two ways. First, it can provide the necessary funds to keep it operating as the hiring process gets underway. Second, if the running of the business depends solely on that key individual, insurance proceeds can help satisfy the business obligations and compensate the survivors. An example is using the insurance proceeds for the repurchase of shares by a corporation for value. 

Unanimous Shareholder Agreements

Although it may not seem like it, shareholder agreements can play an important role in estate planning for businesses. Without a unanimous shareholder agreement, the shares of individual shareholders may end up in the hands of people not intended to own or operate the business. That can have a detrimental effect on value. 

The shareholders’ agreement may also require that a corporation repurchase shares of a disabled or deceased shareholder, helping the shareholder and their family with medical expenses and loss of income or business revenue.


Estate planning makes good business sense. Make continuity plans for yourself and your business before it’s too late.


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