If you are a small business owner, you know first-hand how much time, energy, money, heart, and soul go into such an entrepreneurial endeavor. You have likely spent a significant chunk of your life building up your business and now is the time to start thinking about what will happen to your business when you are no longer around to run things. Yes, planning for your small business will be an important part of the estate planning process. You will need to make many tough choices, but these are choices that will determine the trajectory of something very important to you as well as something that will likely represent a significant inheritance for your loved ones. To help get you started, we are going to take a look at some estate planning tips for small business owners.
Estate Planning Tips for Small Business Owners
The fact is that you need to account for your small business in your estate plans. This is true not only because there could be serious tax consequences should you not plan accordingly, but it is also true so that you ensure your business is distributed the way you want it and, if you want it to continue on after you pass away, planning is essential. The stark reality is that, as a small business owner, you will have two options for what happens to your business after you pass. First, you could plan for it to keep running after you are gone. Second, you could have your business liquidated and the proceeds distributed to your heirs as you wish.
Opting to plan for the continuation of your business after you are gone is likely one that many small business owners hope to choose. Prior to making such a choice, however, it is important to reflect on its feasibility. Check any operating agreements you have in place to see whether your interest in the company can effectively be transferred upon death and what restrictions may be in place on such a transfer. You should also check for such conditions in any other preexisting business agreements.
It will also be important that you have someone who will take over for you after you are gone. Is that person up to such a job? Are they ready and willing to take on the responsibilities of such a transfer of ownership interests? You need someone who has a sincere interest in running the business and will be committed to doing so. And, in addition to be willing to take this on, your choice should be prepared for such a role. Do they have any business skills? Are they qualified to take over running a small business? Do they have the support structure in place they would need to succeed? If yes to all, then you can move forward with determining how you would want your business interests to be transferred. This can be accomplished through direct transfer or via a trust. You may also want to consider making an inter vivos transfer, during your lifetime, as opposed to a transfer upon death.
Sometimes, however, liquidating your small business is the only sound option. Planning to liquidate your business may leave you with conflicting feelings, but it can be the best way to preserve the value of your small business and have it most effectively transferred for the benefit of your loved ones. Through planning, you can set the liquidation method as well as detailing what should be done regarding the sale of business assets such as stocks and fixtures upon your death.
Estate Planning Attorney
Make a plan for the small business you have poured so much into over your lifetime. Verras Law is here to help small business owners develop an estate plan that best honors everything they have worked for. Contact Verras Law today.