Firms with fewer than 20 workers account for 89% of 5.6 million employer firms in the United States. If you own one of these many businesses, then you need to consider what will happen after you pass.
You create an estate plan for your personal belongings, so why aren’t you planning for the future of your business? Follow these estate planning tips to ensure that your business will continue to run smoothly after you pass.
1. Have a Will
The best place to start is with the first step in estate planning. You need to have a will. This document not only lets you dictate what happens to your personal assets, but it also enables you to name a business executor.
This is the person you appoint to continue managing the business. If you don’t do this, your business can descend into chaos as there is no apparent controlling authority to step into your shoes moving forward.
2. Minimize Your Tax Liability
One of the most significant advantages of speaking with an attorney such as Lees & Lees is that they can advise you on the best legal methods for minimizing your tax liability.
Not properly planning can mean the end of your business. Estate taxes can be as high as 50% of the value of your business. These taxes are then due within nine months of your passing.
Can your estate or business afford this type of payout? For most companies, it means selling off large portions of the company assets.
Your tax attorney can help you utilize tax breaks that will protect your estate from these types of fees. You could put your company shares into a trust. Charitable remainder trusts are a great option.
3. Outline Your Succession Plan
If you suffered an accident tonight, does anyone know who would take over? While this is unpleasant to think about, it is necessary for the future of your business.
A clear succession plan will ensure minimal disruption in the productivity flow.
4. Declare a Power of Attorney
So far, we’ve discussed what happens if you pass away. But what about when you are simply no longer capable of managing your business? This is when you need a power of attorney.
If for any reason you become incapacitated, your power of attorney will step in to make legal decisions. This power of attorney can extend through your passing.
If you do not declare someone, then it is up to the court to appoint someone. Who the court chooses is not always in the best interest of the company. You are the best person to make this decision.
5. Obtain Life Insurance
One problem that many businesses face is that they lack the liquidity to handle many post owner’s passing tasks. One that often arises is the buying out of your ownership shares.
Having a life insurance policy can provide the influx of cash that your business needs to buy your ownership.
You would need to take out a life insurance policy that names your business partners as the beneficiaries. Then after your passing, your partners will receive potentially tax-free proceeds that they can then apply to buy your shares of the business.
Follow These Estate Planning Tips
We all know that estate planning is essential for ensuring your possessions go where you intended after you pass away. However, those who own a business, they need to go further with this planning.
If you follow these estate planning tips, you can be sure your business continues in good hands after your passing.
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