Online businesses outlive their owners, so plan ahead

Online businesses outlive their owners, so it's wise to do some advance planning around your virtual estate, experts say.

It's wise to do some advance planning around your virtual estate, experts say

When Henry Ford died, the mighty Ford Motor Co. carried on and cars were manufactured, marketed and sold. It's a different story for small enterprises that now make up a substantial portion of the economy — when a self-employed person or independent practitioner dies, so does the business.

Independent practitioners are responsible for marketing, taking orders and delivering product or service. They typically don't have anyone to fill in when they're gone, so without the independent practitioner, there is no business.

But with the advent of the web, many independent practitioners sell their goods and services online. Most website names are purchased for periods of two to five years and many online e-commerce systems are automated these days, so there is a good chance that a self-employed person's website will outlast his death.

The problem for small businesses is that on the internet, nobody knows you're dead.

This brings up some interesting issues that many business owners probably haven't thought about. My own website will probably be around for a couple of years after my death, for example. People will be able to e-mail me from the site to ask about my business writing and communications training services, but I won't be able to reply.

I could show my wife or daughter how to remove my website. That way, prospects will not be able to contact me and my e-mail server will not overflow and start to bounce messages. However, like many online business people, I also have automated aspects of my order fulfillment process.

In my case, I sell business writing books and books on the business of freelance writing through my website. I use a third party, Lulu.com, a print-on-demand firm, to process payment and ship books, and the company sends me royalty cheques every quarter. When I am dead, Lulu will still be able to sell my books — and cheques payable to Paul Lima will still arrive in the mail.   Scores of independent practitioners depend on third parties to process payments and fill orders. Lynda Green runs Canadian Actor Online (CAO), an information resource site for Canadian actors. The site includes a subscription-based discussion forum where industry experts answer questions about the biz. CAO members pay for their subscription fee online and are automatically granted access to the discussion forum. Payments are automatically deposited in CAO's bank account. The system will survive Green, as long as the website is online.

Who gets to cash my royalty cheques? Who gets to control CAO's bank account? Who gets to profit from manna falling from cyberspace after the small business owner is gone?

Succession planning

A small business owner with an automated online fulfillment system should pay attention to succession planning if she wants to conduct business from the afterlife and direct revenue to the right heir, says Diane Mason, a lawyer practising in wills, estates, and real estate law with the Toronto law firm Mitchell, Bardyn and Zalucky LLP. 

For instance, cheques payable to my personal business may possibly be accepted for deposit by a bank post-mortem in the short term, "but your spouse can't take money out unless she has signing authority on the account," Mason says. Deposits will be tied up in that account until the estate's legal representative deals with the estate assets.

When a person dies, the estate needs to be administered by a representative — an executor if there is a will, or an administrator if there is no will, she says. The contemporary term for these two appointments is "Estate Trustee, With or Without a Will."

If a will is in place, the executor calls in and then distributes the estate's property — including the deceased's business — in accordance with the terms of the will. But include a cyber property that automatically generates an income, often through a third party in the U.S., and the process can become quite complex — even with a will in place.

If the terms of the will provide that the estate should continue to operate, or if the business must continue operating for other reasons, then the executor will need website addresses, user IDs, passwords and contact information to ensure the domain does not expire and to communicate with any third parties involved in the processing of payments and distribution of orders.

In addition, the executor will need file transfer protocol (FTP) information to alter a website. For instance, on my website, the executor (or a designate) would have to:

  • Remove those pages that promote my writing and training services since I could not deliver such services.
  • Remove my e-mail address or have it forwarded to another address.
  • Make my book promotion page, which connects to my bookstore on Lulu.com, my home page.
  • Alter my profile on Lulu.com so cheques are payable to my estate, so that income can be distributed in accordance with the terms of my will.
  • Work with Lulu to transfer payment of royalties to my spouse, which can be more complex than one imagines — depending on the terms and conditions wills and of contracts with third parties.

As more and more business owners generate income online, even when they leave for the great beyond, "executors are often left scratching their heads over what to do with the funds and how to wrap up the business or to ensure it continues to function and that the right people benefit from it," says Mason.

If the executor does not have access to appropriate information, the third party, webhost or ISP can ask, 'What authority do you have to speak on behalf of the deceased?' Having a proper will, as well as IDs, passwords and so on make the process run much more smoothly.

"We personally decide what we want to happen after we die. If we don't make a will, we leave everything up in the air, until someone steps forward to look after what we've left behind," Mason says.

Will won't cover everything

She cautions that a will is not a panacea. It is "part of a carefully-drafted estate plan" that will help the estate representative continue to carry on the deceased's business and distribute the income from that business.

"Making sure your affairs are in order involves not only a will, but ensuring whoever looks after your affairs has all the information available to make the process run as smoothly as possible," she says.

Mason has one caution about revealing user IDs and passwords: "To avoid fraud, such information should be kept in a safety deposit box, which your executor would have access to immediately following your death, provided he has a notarized copy of the will and your funeral home's death certificate."

In short, if you want to keep on giving after taking your last breath, it might be a good idea to get your affairs in order today. Make sure you have a detailed will, double-check any legal agreements that you have with online third parties, and make sure those who you leave behind have all the information they need to communicate with third parties on your behalf, says Mason.

The author is a Canadian freelance writer and author.