When you own a closely-held company in Massachusetts, it becomes one of your biggest assets. However, if you pass away without a comprehensive succession plan, the business often falls into probate.
This court-supervised process can bring daily operations to a sudden standstill and make sensitive financial information a matter of public record. Understanding how a probate can affect your company is critical to ensuring its future survival.
Freezing operations
When your closely-held company has to go through a probate, it can essentially undergo an operational paralysis. Banks may freeze business accounts held in your name or require your signature, which can halt payroll and vendor payments.
No one can sign new contracts or renew leases until the court officially appoints a Personal Representative (PR). The ambiguity around who is in charge can create uncertainty among your employees and clients. These factors can ultimately prevent your company from moving forward after you pass.
Leaving a voting and management gap
Until the estate is opened, the heirs of a closely-held corporation cannot vote the shares. This can delay major corporate actions and the election of new directors.
Even if you left behind a will, it can take weeks or months to get Letters of Authority, especially if there are court backlogs. Moreover, the court-appointed PR may not have the expertise to run the specific industry, leading to poor management decisions.
Safeguarding your legacy
Protecting a closely-held company from the delays of probate means taking proactive legal steps while you are still healthy and at the helm. Creating an estate plan can provide your surviving shareholders with a clear roadmap for transition. A lawyer can help you review your options to ensure the business you built continues to thrive without interruption.
