Financial Counseling Certification Program (FiCEP) Practice Exam

Is it necessary for sole business owners to have a plan in the event of death or disability?

1. Yes, it is an essential safeguard

2. No, it's optional

3. Only if they have dependents

4. Only if they are nearing retirement age

The correct answer is: Yes, it is an essential safeguard

Having a plan in the event of death or disability is crucial for sole business owners. An essential safeguard ensures that their business can continue to operate smoothly without the owner's direct involvement. In the absence of a plan, the business may face significant disruptions, including financial instability or closure, especially if there are no clear directives for handling the business's assets or responsibilities. Planning helps in establishing procedures for leadership succession, managing the business's finances, and protecting the interests of clients, employees, and any other stakeholders. It can include aspects such as creating a will, obtaining life insurance, and setting up power of attorney arrangements. This foresight is not just about the welfare of the business but also about securing peace of mind for the owner, knowing that their hard work and legacy will be protected and that any beneficiaries or employees will not be left in a difficult position. The other considerations related to dependents or age introduce factors that may influence the urgency or specific features of a plan, but they do not diminish the fundamental importance of having a comprehensive plan for all sole business owners, regardless of their personal circumstances.