You’ve worked hard to build your business and you probably dream of passing it (or the value of it) along to your family when you are gone. If you haven’t put the right legal plan in place, you could be passing along a nightmare instead of a dream.
There are 4 essential planning techniques every small business owner should consider to ensure it passes along seamlessly to their loved ones:
If you own a small business, having a Last Will & Testament is not enough. When your business assets pass to your family under a will, it first must go through probate. This will put your business in the hands of the court, which is never desirable. Your beneficiaries will need authorization from the court to conduct business activities and they will have to report business assets and income on required estate inventories and accountings. A very simple way to avoid this unpleasant scenario is to put your business assets into a Revocable Trust. Unlike a will, assets in a trust do not pass through probate. So, your business assets, income and activities stay out of the public record and the business can be managed privately and immediately upon your death, without court interference and cost.
If your business has multiple owners, you will need a buy-sell agreement. A buy-sell agreement ensures that upon certain conditions—like the death or disability of a partner—the remaining owners have the cash to purchase your interest in the business, or your shares will pass directly to your heirs. This will prevent your beneficiaries from getting stuck owning a business they don’t want and can’t sell, and it also protects you or your remaining partners from being forced to deal with new owners they didn’t count on such as the spouse or children of a deceased partner.
Unless you're certain your business will continue to generate significant cash flow immediately after you are gone, the business income might not be enough to financially provide for your family. To offer a safety net for your heirs, employees, and customers, invest in life insurance to provide liquidity while your family handles your affairs.
Never underestimate your importance in the success of your business. Without you, where will your business be in 6 months or a year? If you hope to pass control of your company to your family or to a key employee, you’ll need a succession plan to make sure they can successfully run the business without you. A good succession plan will ensure you make the right choices regarding the next generation of your business.
If you want a specific family member (or employee) to take over the business, you should designate that person in the plan, and then explain exactly how and when the business will be transferred to him or her, and under what terms. If you want the business sold, you’ll want to start planning for that now.
Take the first step to protect your business both today and if anything should happen to you. The attorneys at Robbins & Bentz have significant experience advising small business owners, and we are proud to call many of Lake Norman’s business owners our clients! Robbins & Bentz is centrally located in Cornelius, North Carolina. Our practice areas include estate planning (wills, trusts, powers of attorney and more), probate and trust administration and small business planning.
Schedule your appointment today by calling 704-892-4098 or send us an e-mail to firstname.lastname@example.org. We look forward to working with you!
This article was authored and published by Robbins & Bentz, PLLC.
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