As a business owner, your company is an important aspect of your life. You have dedicated time, money and effort into making it a success, and your estate plan should outline your wishes for that business when you pass away. What estate planning documents can you use to protect your business?
A will acts as the foundation of most estate plans.
Because a last will and testament addresses all the property under your name at the time of your death, it provides a strong foundation for business owners’ estate plans. Other documents in your estate plan may address specific pieces of property, but a will outlines your wishes for any property that you have not placed in trust.
Wills can also be used to detail your plans for a business if none of your loved ones will operate it after your death. Your will can specify that the business will be sold, eliminating any questions that your loved ones may have about the fate of the business you have built.
A trust can make business succession a smoother process.
While a will is the foundation for most estate plans, business owners should consider using a trust to transfer ownership of their company. According to the New York Times notes, there are several advantages to establishing a trust as a business owner. It can protect your privacy by avoiding the probate process, decreases the cost of legal fees, court costs and taxes, transfers property immediately to your beneficiaries and allows you to designate a successor for your business.
Establishing a succession plan helps your successor run the business.
Because sole proprietorships rely on their owner for their success, a sole proprietorship should have a plan in place that allows the business to be operated or sold after you pass away. If you want to pass your business to a member of your family, a succession plan can ease that transition. Detailing the business’s holdings, its debts, its important contacts and any account information makes it easier for your successor to operate the company.
Your succession plan can also be used by your successor if you become incapacitated by an injury or illness.
Drafting a buy-sell agreement outlines a plan for your partners.
If your business is a partnership, your beneficiaries may find themselves partners in a business that they can neither operate or sell. A buy-sell agreement establishes what will happen under certain conditions like the death of a partner or their incapacitation, and it outlines how your loved ones can sell their share of the business to the other partners at a fair price.
Whether your loved ones will sell the business after your death or a member of your family will continue the success of your company, careful estate planning can safeguard your business and provide for your loved ones.