Own an Arizona Business? You Need to Know This …

Written by Paul Deloughery

Does your family depend on your company’s income? Are you hoping to pass your business on to a loved one?

If so, read on. Here are common scenarios, and the solution.

You have a serious illness, and have no Durable General Power of Attorney that specifically provides for management of your business. In this case, someone will need to go to court and get appointed as a Temporary Conservator. Sounds easy enough. But what if your family gets into a dispute over who should be appointed?  That could delay the process by months. And meanwhile, your business has no one to manage it. Once a Conservator is appointed, that person has authority to continue to run things under A.R.S. 14-5424 (C)(3). BUT the status is less than clear on whether the Conservator can turn around the business if it suffered during your illness or during the court proceeding. The statute allows the Conservator to “continue” the business. But I’ve seen that be interpreted as not requiring the Conservator to take proactive steps to help fix or correct problems as needed.

You have a serious illness, and you DO have a Durable General Power of Attorney. In this case, you probably think you’re in the clear. But … most Power of Attorney documents that I’ve seen do NOT include language specifically allowing the agent (aka “power of attorney” holder) to continue to operate a business. If businesses have any sort of license, this can also be catastrophic.

Your business is in a Living Trust. You might be slightly better off with this situation. But, two common problems are (a) having a business license in your personal name and (b) the trust document not specifically permitting the continuation of the business by a successor trustee. Again, your business could suffer while you try to fix this problem somehow. In most instances, the only solution is to go to court and ask for permission for the trustee to continue the business. Meanwhile, the business flounders.

You die, and the business is not owned by a Trust. The Arizona Probate code merely requires the Personal Representative (aka executor) to administer your estate expeditiously in the best interest of the estate. That is interpreted to mean basically that the Personal Representative just needs to list it for sale. If your enterprise lost clients during your illness, the PR need not do anything to try to turn the business around. (For the record, I disagree with this interpretation of the statute, but I’m sharing how the Arizona courts treat this situation.)

Bottom line: Talk to your estate attorney and come up with a continuation plan in case you are out of the picture. Have someone picked to take over the business who actually knows how to run the business. Then make sure that somehow that person will have authority to do what is required. If your venture is licensed, the license should be held in an LLC or corporation if that is allowed. Then make sure there is a clearly documented transition plan in place for that entity.

About the author

Paul Deloughery

Paul sees through complex issues and comes up with enforceable strategies to resolve his clients’ problems. His own experiences have helped him understand the issues others have. He knows the pain that family disputes and litigation can cause, and will do his best to counsel families ahead of time to ensure families don’t go through similar situations.

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