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Article published in Issue Number: 070202

And when I'm gone

By Adam Atlas, Attorney at Law

It's hard to face. But have you considered what will happen should you die or become incapacitated? Who will inherit your business? Who will mind the store? Very few ISO or agent agreements provide for this contingency. Estate planning may not be your cup of tea. But you should do it, eventually.

I am not a successions lawyer; I have no expertise in wills and estates. But as a legal practitioner in the merchant services industry, I suggest that you, as ISOs and merchant level salespeople (MLSs), contemplate the following when planning your business succession:

Have a will

If you have specific wishes about the disposition of your assets upon your demise, retain a local lawyer who is familiar with the laws of your state. Have your lawyer draft a last will and testament that clearly conveys your wishes. Be sure it makes provisions for rights in your ISO or MLS business, as well as other assets you want to include.

Groom a successor

Since unforeseen, unfortunate future events could affect your ability to function, plan for how your company will survive without your active participation.

You should have someone in mind who could assume your role should you be unable to carry on in your present capacity. This can be a relative, but it doesn't have to be.

Consider tying your designated replacement to the business contractually, so your company will be protected by that contract whether or not you are on the job.

Review your agreement

Consult your ISO or agent agreement to see what it sets forth about succession. Agreements will usually have a clause that says, "This agreement will enure to the benefit of successors."

Most of the time, this means if you pass away tomorrow, the rights and privileges of your enterprise under the agreement will go forth to your successors.

An ISO or MLS agreement is not like other business agreements. The validity of this type of agreement depends on a number of underwriting criteria specific to the owner of the ISO in question.

For example, if you have great credit, but your heirs do not, that might deter a processor from doing business with your heirs when they succeed you.

Get heirs preapproved

Some processors will preapprove specific individuals as heirs under an existing ISO or agent agreement. This process requires that heirs provide certain information to acquaint the processor with them before the parties begin working together.

Processors are not all open to this arrangement because it can take additional time and effort. Depending on your personal situation, you may want to insist on such a provision.

Keep records

Most small companies exist, to a large extent, in the minds of their owners: As the owner of a small enterprise, you carry in your memory and in your relationships the heart and soul of your business.

If you want someone else to benefit from what you have built, endeavor to keep meticulous records of all aspects of your business. That way your designee can easily pick up the reins.

Incidentally, good record keeping is consistent with your obligations under a typical ISO agreement. Make sure you are in compliance with card Association rules.

Keep nonpublic, personal information (if you are allowed to retain it) under lock and key, accessible only to authorized individuals. No exceptions.

Write a how-to memo

It's a good idea to prepare a memo describing, in plain English, how to run your business. Knowing your contractual rights and bank balances is only a fraction of what running a business entails.

Merchant acquiring is complicated for people with extensive industry experience. For those thrust into it because of a succession, it is even more complex.

Build a cash reserve

Whether or not your heirs take over your business, they will need some time to fill your shoes if you leave suddenly. During that period, bills will continue to accumulate.

Ideally, your company should have three to six months of operating cash to facilitate the transition to new management. Today, many people live on lines of credit; saving cash can be difficult. Nonetheless, it is integral to successful estate planning.

Limit debt

Many individuals have debt that far exceeds their assets. To have a well-planned estate, however, your assets should be greater than your debt. This includes your business's asset-to-debt ratio.

Your local attorney, financial planner and insurance broker are well-positioned to provide informed estate planning advice. Work with them. Then, after your plan is in place, get back to enjoying life and building your business.

In publishing The Green Sheet, neither the author nor the publisher is engaged in rendering legal, accounting or other professional services. If you require legal advice or other expert assistance, seek the services of a competent professional. For further information on this article, e-mail Adam Atlas, Attorney at Law, at or call him at 514-842-0886.

Article published in issue number 070202

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