If you own a family business, you know the hard work and sacrifice that it has taken to build. In fact, you may see your business as your life’s work and a vital part of your legacy. That is why it is so important to consider your business when you go through the estate planning process. Failure to do so may irreparably harm your business and destroy your hard work.
Business Succession Planning
There are several critical questions that must be answered when you plan for the longevity of your personal business past your death. Do you want the business to continue? Who will own the business? Who will manage and run the business? What will those transitions of ownership and management look like?
If you pass away without planning for your business, it will likely be up to your executor and the probate court to determine what will happen to your business. One possibility is that your surviving spouse and children will have the option of continuing the business, with little awareness of how to take over. Another possibility is that the executor sells the business to settle debts and costs, then distributes the rest of the proceeds amongst your beneficiaries.
What are Your Goals?
One of your goals may be that your business becomes generational and provides for your family for years to come. Whatever your goals may be, they need to be explicit and specific in your written succession plan. The idea is to create a seamless continuity of operations while minimizing conflicts amongst the new owners. Some elements of your plan may include:
- Appointing someone you trust, or who you have groomed, to run the business in your absence. This is of critical importance for the longevity of your business. If you do not have a successor, I would recommend beginning your search.
- Designating who you wish to be owners of the business and what stake they will own. You do not want an irresponsible or incompetent beneficiary to have a controlling interest in the business.
- Deciding what mechanism to use to transfer the business, whether it is through a distribution of shares, a gift, a trust, or a sale.
- Limiting the tax implications of the transfer of ownership.
- Limiting business liability for your beneficiaries. The last thing you want to do is leave a loved one a lawsuit against them.
Do you own your own business? Are you worried about how your business will continue without you? Let me help you plan for your business. I have handled estate planning and complex tax matters for more than twenty years and have a Master of Law Degree (LLM) in Taxation. My team will listen to your wishes, provide a comprehensive examination of your business, and give you the best options to make a fully informed decision. Contact the Law Offices of Robert S. Thomas at 847-392-5893 or visit our website to schedule an appointment today.