Business owners spend a lot of their time working in their business with an eye towards growing their business. Sometimes they are so focused on business planning that they fail to either have an estate plan or fail to coordinate their business plan with their estate plan.
Some estate planning considerations that you should be concerned with as a business owner are:
- Who will run the business if you become incapacitated? Your spouse is not always the best person to step in and run a business. There may be a key employee or manager that would know the business better and be able to keep it going during the your incapacity. If licensing in required, the you will want to make sure you have a qualified and licensed person to step in to maintain day to day operations.
- Will your business have to be sold if you are no longer able to actively participate in the business? When disability or incapacity strikes, tough decisions may need to be made if the disability will be long term and you will not able to run your business. You will want to make sure you have agreements in place to maintain business continuity without you. You will also want to make sure your estate plan coordinates with your business plan in this respect.
- What happens to the business upon the your death? There are times that the business will have to be sold upon the owner’s death, but that may not be what you want or intended. If there is a family business, perhaps the you want the business to be passed on to the next generation. In order to accomplish this, there needs be a succession plan in place to make sure the business passes smoothly to the next generation and to ensure that the business is properly structured and financed to handle the transition.
- Are there partners in the business that have buy out options? If there are multiple owners in your business, it is important to have agreements in place to spell out what happens upon each one’s disability or death. You may not want to find yourself in business with your deceased partner’s heirs. A buy out option will allow partners to maintain control of a business but allows the deceased partner’s heirs the right to receive the value of the business in the deceased partner’s estate.
These are just a few considerations for a business owner. As you can see, it is important to plan for disability and death, not just from an estate planning perspective, but also from a business planning perspective. Taking it a step further, these two plans need to coordinate with each other to make sure that nothing is in conflict. As a business owner who has worked hard to create a thriving business, you don’t want to see it lost or harmed by events that could have been avoided by proper planning.