Incapacity Planning for Business Owners: 14 Steps

Hoopes Adams & Scharber PLC • February 13, 2026

If you weren’t available – even temporarily – to run your business, would it operate profitably in your absence?

Our November 2025 article, “Multiple Owners? A Buy-Sell Agreement Is a Must,” discussed how business co-owners can protect themselves and their company if one of them experiences a life-changing event (e.g., death or disability).


But what if it’s just you? What would happen to your company if, for a significant time, you weren’t there to run it? In this article we will take a look at some planning steps that can promote business continuity in your absence.


Importance. Let’s all acknowledge that this probably isn’t anyone’s favorite topic. Like discussions of life insurance and succession planning, incapacity planning involves confronting your mortality – death, major illness or injury, mental incapacity.


That’s probably a can that you would probably rather kick down the road. The problem is, you never know when you’re going to run out of road.


So, first, let’s talk about why this is really important and why you shouldn’t put it off.


  • Your business is probably your main source of income and your most valuable asset, and protecting it is in your best interest.
  • If you have employees, your business is probably their main source of income.
  • If you have kids, your business (or the proceeds of its sale) might become one of their most valuable assets.

In the absence of a well-conceived plan, your incapacity could:


  • threaten your company’s relationships with lenders, investors, major customers, and important suppliers;
  • cause operational and product/service fulfillment problems that undermine profitability and business value; and
  • cause key employees to leave the company.

Incapacity planning involves your figuring out:


  • who, if you’re not around, will make the major and day-to-day decisions in your business;
  • how they will be empowered to make those decisions; and
  • under what circumstances they will step in to (and out of) your shoes.

14 Steps. Let’s cover some basic steps in protecting your business against your incapacity:


  1. If you don’t have an incapacity plan, resolve today that you are going to create one.

  2. Pick your replacement. If you already have a key employee you put in charge when you go on vacation or are out of the office, he or she would seem to be the logical candidate. If you don’t, now is the time to hire or develop that person.

  3. If you have multiple good candidates and don’t know which one to choose, considering asking your professional advisors. Your CPA or business attorney might see something in a candidate that you’ve overlooked. They might also have good suggestions on how to structure your management hand-off.

  4. Evaluate their readiness to be in charge. If they lack skills or experience in any important area, invest in them personally and/or get them the appropriate training and continuing education.

  5. If one of your adult children is your ultimate heir apparent but isn’t the best qualified right now, designate a non-family member to be your replacement in the short term.

  6. Give your replacement everything they need to do their job – including passwords and other access to essential business data, documents, and key contact information.

  7. Don’t leave your replacement on a ledge. Even with preparation, they should not be expected to step fully and immediately into your shoes. Look at your other key employees and make any needed investments in their skill levels.

  8. Define all of your decision-making roles. Just because you know everything about your company doesn’t mean that your replacement has to. Look for opportunities to de-centralize your decision-making and, as we suggested above, elevate the management skills of all of your key people. This might involve designating more than one replacement, to handle separate aspects of the business.

  9. View this process as a way to make your business nearly as effective and profitable in your absence as it is in your presence. That’s an attractive quality for prospective buyers; even if you are never forced to activate your incapacity plan, the planning process might increase your company’s market value. (Read any good books lately? Try The E-Myth Revisited by Michael Gerber.)

  10. Ask your business attorney how to give your replacement the legal authority to, in your absence, run the business, execute contracts, etc. Powers of attorney – general, durable, financial, business-specific, etc. – are the most common legal instruments for granting the needed authority and can be specifically structured to support your objectives.

  11. Your business attorney can also advise you on how to convey and withdraw the temporary legal authority. If you are conscious and have the mental capacity to hand over the keys, that makes things simple; but you also want to have conditions and procedures in place for authority to be conveyed if you’re unable to call the play.

  12. And your business attorney can tell you whether and how your incapacity or “succession” plan should be incorporated into your company’s governing documents (operating agreement, bylaws, etc.).

  13. Ask your insurance agent for guidance on whether life insurance or disability insurance has a place in your incapacity planning.

  14. Finally, either your business attorney or estate planning attorney can advise you on the relative merits of transferring your business ownership into a revocable living trust that you control. Under such an arrangement, your successor trustee would seamlessly assume legal authority over your business (along with your other assets) and either operate it directly or designate a manager.


Succession and incapacity planning are common elements of our advisory services to clients who own a business. To start the discussion of how to ensure the smooth transition of your company’s leadership in the event of your incapacity, contact Ron Adams or Ryan Scharber.


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