If you are a business owner, you have worked long and hard to be successful. However, there comes a time when you look toward the future and decide what you would like to happen, according to Northern Nevada Business in “Protect your business through estate, succession planning.”
The continuity of any business, when the owner leaves the business because it is sold or because of death, must be dealt with so that the owner, family members and business partners have a plan in place.
An estate plan helps a smooth transition occur if the owner should die unexpectedly. Even a basic plan that authorizes a partner or key employee to continue operating the business on a temporary basis will serve to protect the value of the business and the good will of its customers.
It is not easy to decide who the successor will be, but it is one of the big decisions that must be made. If you simply name a spouse or a child who is not ready to take the helm, you could doom the business. If the family is involved with the business, you’ll need to give clear directions as to who will be responsible for what tasks.
If you have adult children who have never worked in the business at all, and worse, never worked in the business together, you could be looking at the end of the business. Consider a plan where family members become “silent owners,” and key employees are given more authority. You’ll need to work with an estate planning attorney who has helped clients successfully accomplish this, so that family strife does not spill over into the business.
A valuation of the business will also have to be done by an experienced professional.
Some families use life insurance proceeds to provide the funds for a child, spouse or partner to buy out the other business partners when the founder dies. This is also a way to provide assets to family members, who won’t receive any interests in the business.
Make sure that your estate plan aligns with your succession plan. A buy-sell agreement defines the exit strategy for partners and details what will happen to the business in the case of retirement, disability or death.
If no family members or partners want to take on a leadership role, you’ll need to identify a key employee and discuss with him or her the possibility of buying into the company. This can help foster employee retention and offers consistency during the transition.
We can advise you on creating an estate plan that fits your unique circumstances and can include your business asset.
Reference: Northern Nevada Business (Oct. 30, 2018) “Protect your business through estate, succession planning,”