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Peterborough, Ont. lawyer Peter Lillico has a horror story about one of his clients, an entrepreneur who headed off to Mexico for a vacation, had a stroke, and eventually died.

The man had no succession plan, he kept all the key details about his business in his head, and he hadn't even given cheque-writing authority to his bookkeeper. As a result, employees weren't paid, customers couldn't collect what they were owed, and the bank froze the company's accounts. The mess took ages to clear up.

The moral of the story, says Mr. Lillico, who specializes in estate succession planning, is that small-firm owners must make plans to deal with the possibility they will be incapacitated at some point.

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Mr. Lillico's checklist to ensure small business survival includes:

Buy disability insurance, and "key man" insurance for the company, so there will still be money coming in if the top dog is out of commission. The money can also be used to hire a temporary manager.

Have some kind of succession plan. It should specify who will handle sales, administration and other functions. This doesn't have to be elaborate, and could be used even if the boss is stuck somewhere because of flooding or volcanic ash.

Have a will, a power of attorney, and a separate specialized power of attorney for your business.

Have a partnership or shareholder agreement - if you have partners - that specifies what happens if someone is incapacitated or dies.

"Every day of every week bad things happen to some business person and it precipitates a crisis," Mr. Lillico said. "If somebody has prepared, it is survivable. If they haven't, it can be damaging, crippling or even fatal to the business."

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