Small business owners have many individuals depending on them financially, including employees and family members. As a small business owner, preparing for any eventuality is essential to help limit and navigate any risks.
This includes the unlikely but unfortunate event of your death or incapacitation.
Business Type
The type of business you have determines what will happen to it unless otherwise specified. Sole proprietorships dissolve with your death, and any financial ties to the business become your personal assets and liabilities.
For other businesses, like S corps, LLCs, and partnerships, terms must be specified in your operating and partnerships agreements. Without a proper will in place, the distribution of assets is divided up according to the laws of your individual state.
Challenges
Whenever a business changes hands, whether through its sale or death, it can lead to uncertainty. This is especially challenging because business owners are often business operators, and the success of a business is intimately tied to their work.
It is often family and friends who are responsible for dealing with your company once you have passed, and this makes the situation even more difficult. People are often in mourning during a crucial time in your business, and while understandable, it can be detrimental to your loved ones’ future financial stability.
Estate Planning
There are a number of aspects to consider when planning your estate. The first aspect to address and create is your last will and testament. This will be used in case of your death.
Creating a living trust is also important in case of incapacitation as it names a trustee to deal with your affairs while you cannot. Additional paperwork to consider would be a financial power of attorney, a medical power of attorney, and an advance healthcare directive.
In addition to establishing this basic paperwork, which all individuals should consider, whether they are business owners or not, there are a variety of other considerations in estate planning. One includes establishing the business line of succession. This helps to eliminate arguments and legal disputes over ownership.
Additionally, making a plan and utilizing different tax strategies to minimize tax burdens is essential to protect your assets. If not properly done through the establishment of trusts, gifts, and insurance policies, estate and capital gains taxes can be crippling.
When planning your estate, having a list of your properties, investments, and other assets can help eliminate confusion. When assets and beneficiaries are specified, the potential for problems can be alleviated.
By implementing all of these aspects in the estate planning process of your business, a business owner is able to protect the most important aspects of their life, including their family, friends, and business. All of these can benefit from a well-qualified estate planning attorney to help you establish a well-thought-out game plan to protect your legacy.
Conclusion
No one wants to consider the end of their life, but by failing to consider such, you fail to plan for it. Planning for end-of-life scenarios is a vital component and an act of love for your family. It also helps to give you peace of mind in knowing that your loved ones are well protected and provided for.
Establishing your estate and implementing the proper legal paperwork to protect it is the key to eliminating problems, arguments, and uncertainty. Instead, you can promote as smooth of a transition as possible for everyone involved.
