Estate planning is essential for people to outline their wishes for what will happen to their possessions after they pass away. While this process can provide peace of mind to people in any situation, it is a necessary step for people who own a business. What should business owners know about creating a well-thought-out estate plan?
Estate planning ensures that you decide what happens to your company.
As an owner of a business, you have set and achieved many goals for your business. However, passing away without an estate plan leaves the next chapter of your company’s operations in the hands of the law. Estate planning allows you to determine who will inherit your company, allowing you to choose someone who will continue this work and guide your business’s operations into the future. Estate planning is a subset of the full succession planning for your business that you should consider completing at your earliest opportunity.
Estate planning can support both your loved ones and your business.
While most people think of an estate plan as a means to provide for their loved ones, your plan can also be a way to protect the business you have built. Unfortunately, dying without an estate plan or succession plan could lead to the dissolution of your business, or having your business assets caught in limbo. For example, a sole proprietorship may cease to exist without its founder if the beneficiaries do not agree on whether to continue the company’s operations or a limited liability company could be left without access to funds or even control of the company being established. With appropriate estate, asset and succession planning, however, you can take steps to ensure that your company continues into the next generation of owners and potentially protect valued employees.
Some estate planning tools can keep your business out of probate.
Death and the probate process has the potential to disrupt your business’s operations. This can not only impact your company’s continued operation, but it can also interrupt the income your family relies on. Utilizing estate planning tools such as trusts, wills, operating agreements or bylaws, and succession planning could allow you to bypass the probate process, either passing the company immediately to its new owner without interruptions or wrapping up operations. Note these are only some of the tools available for successful continuity and succession planning for your business.
Creating an appropriate and effective estate and succession plan to achieve your goals can be challenging. Thankfully, with the proper guidance, you can make informed decisions that support your goals for your business, reflect your wishes for your estate and support your loved ones.