The average person only has to think about their family members and the impact they would like to have on the world around them when they create their estate plans. Business owners have a lot more to consider.
After all, they have obligations to many people beyond their immediate family, including their employees and those that their business owes money. As a business owner, you need need to address those responsibilities in your estate plan or run the risk of not just disappointing people but leaving them in difficult situations.
What are some of the crucial considerations for business owners engaged in estate planning?
They need to think about business ownership
Especially if you are a sole proprietor, your death could mean the end of the company. Simply naming someone to inherit the business isn’t adequate. You need to think about what they will likely do with the company and what their inheritance will mean for the people who work at the business.
While you may want your closest family members to inherit what the company is worth, you may also need to be honest with yourself about their inability to run the company. You could order the sale of the business or bring on a silent partner who can help manage things during the transition when you leave the company or die.
You need a succession plan
Ownership is only one of several concerns when the person who started or runs a company passes away. Having the right person or people to take over your responsibilities will also be crucial if you expect the business to remain solvent and retain its employees.
Having an in-depth succession plan, including training materials and a shortlist of possible candidates, can help keep the business running smoothly even if you die unexpectedly without a chance to train your replacement.
You have to think about taxes
Whether your family members will take over the company or will sell it, there could be tax implications for them. The bigger and more successful the company is, the more likely that there could be estate taxes owed because of the transfer of the business after your death.
Identifying and planning for the complications and risks that business ownership creates for your legacy will help you not only keep the business operational but also reduce the stress on your loved ones and your employees when you die.