If you are the owner of a small business that you have worked diligently to build from the ground up, the last thing you want is for the fate of your business to be compromised upon your passing. That is why you should have an estate plan in place that clearly outlines how you would like your small business managed when you pass away.
If you do not have an estate plan, your assets will be probated and the success of your business could be in jeopardy. Here, will and estate planning attorney Douglas C. Lauenstein explains the necessary steps you should take to ensure your small business can continue to run smoothly after you die.
Obtain Life Insurance
Life insurance is important for multiple reasons. Not only does life insurance provide financial security for your loved ones in the event of your passing, but it also allows the co-owners of your business to obtain tax-free proceeds so they can take over your portion of the business. In other words, taking out an affordable life insurance plan can greatly benefit your family as well as individuals involved in your small business, providing the financial means to keep your business afloat and your loved ones secure.
Choose Your Heirs
If you are the sole proprietor of your business, it is imperative to have a plan in place for how business decisions should be handled after you die. A small business is considered a part of your property and is a personal asset that, if not accounted for in your estate planning, will go through probate like any other asset. If you want to pass your business on to a new owner upon your passing, make sure you clearly outline that wish in your estate plan. If your small business is a family business or has multiple owners, make sure you have a plan in place outlining the responsibilities of each individual upon your death.
Consider a Living Trust
By creating a living trust, you can immediately transfer the assets of your small business after death and avoid probate fees, saving your estate from paying expensive fees and taxes. A living trust outlines asset distribution and is an effective way to minimize taxes and bypass court costs.
Create a Buy-Sell Agreement
Just like it is important to name who you would like to take over your business once you pass, it is equally important to create a buy-sell agreement if your business has multiple owners. This prevents instances where your co-owners suddenly become sole owners of your business, a position they may not want and may struggle to get out of. A buy-sell agreement ensures a fair sale price for your business in case the additional parties wish to sell their shares of the company. It also protects against certain individuals from owning shares of your business in the event you do not want them to.
Speak to Estate Planning Attorney Douglas C. Lauenstein to Learn More
While estate planning is a necessary part of managing your small business after you die, the intricacies surrounding the legal process can feel challenging. This is why you need a trusted estate planning attorney to help you create a detailed estate plan that works in the interest of you and your loved ones. If you are the owner of a small business and want to ensure there is a plan of action in case of emergency, contact the estate planning attorney Douglas C. Lauenstein today, who has extensive experience in the areas of estate planning, wills and trusts.