How Is Your Business Included in Your Estate Plan?
A properly developed estate plan provides protection for your family in the event of unanticipated events that can endanger their security and future. If you own a business, addressing the future of your business in your estate plan is just as essential as safeguarding your family. This strategy ensures that your family won’t face any difficulties or hardship if unforeseen occurrences affect the operation of your business and also can maximize the benefit your family receives from your business investment.
What Happens to Your Business If Something Happens to You?
Business planning includes more than only anticipating the future growth and direction of a company. It also must address what happens to your business if you suddenly become temporarily or permanently unable to fulfill your role in the business. If you don’t have a business succession plan, the possibilities take several different forms.
If you are the sole owner of a business, and something happens to you, your business may end abruptly and cease operations completely. But then what happens to your business assets, accounts receivable and payable, your employees, customers or clients, and other aspects of your business operations? Maybe your family members or employees can keep the business running — but will they have the legal authority to do that? Maybe an outsider would be interested in buying your business — but how will your family negotiate the sale of your business?
If your business has multiple owners, the issues become even more complex. Who gets your interest in the business — and do they have to pay for it? Will your family members inadvertently end up with your interest in the business — or will they be deprived of the right to receive your interest and participate in the business?
You are in the best position to determine what happens to your business interests if an unanticipated event prevents you from continuing your business duties. You can provide the answers to all the questions about what happens by including a business succession plan as part of your estate plan.
What Does Your Business Succession Plan Address?
Your business succession plan addresses several extremely important considerations. Overall, it provides for what happens to your business if you become unable to fulfill your role. When you work with your estate planning attorney to develop a succession plan for your business, your lawyer helps you navigate through all the critical decisions affecting your business operations and your family. Consulting with an attorney experienced in both estate planning and business law is essential. Your decisions may have implications for the structure of your business, as well as other operational issues such as taxation and business insurance.
One of the primary goals of a succession plan is determining who will run your business if you cannot. If you have a family business, designating the roles and responsibilities of family members in advance can avoid potentially divisive disputes if someone has to assume your duties. That can make all the difference in whether your business survives and stays in the family or ceases to exist.
If your family is not involved in your business and has no interest in continuing it, you can provide for operation or sale of the business to managers, employees, or someone outside the business. You are in the best position to decide what is most beneficial for the future of the business and the other people who are involved.
If you own a business with others, it is essential for the co-owners to make decisions about continuity of the business if something occurs that results in one of the owners being unable to carry out their responsibilities. Buy-sell agreements, which may provide for purchase of a deceased member’s interest by the remaining owners, are one common approach to the situation. The right solution depends on the specific circumstances. In any case, all the owners should ensure that beneficiaries of a deceased or incapacitated owner (like spouses or other family members) do not unintentionally become owners of the business.
In addition to providing for what happens to the business, your succession plan and your estate plan work together to ensure that your business assets and financial interests are structured in a way that maximizes the benefit to your family and minimizes other issues, such as taxes and probate of business assets in an estate. A range of tools and strategies are available to structure both the business and your estate to accomplish these goals, including avoiding probate of your business assets. Your estate planning lawyer helps you navigate through all these issues to determine the right structures and strategies to optimize benefits for your family and your business.
Schedule a Free Consultation With an Experienced East Valley Business Succession and Estate Planning Attorney
Attorney Shane Peterson assists businesses of all sizes and types with the important legal considerations involved in setting up and running a business, including addressing your business as part of your estate plan, whatever your circumstances may be. Shane has extensive business law and estate planning experience. At Peterson Law Offices, our practice focuses on both of these critical areas for business owners.
We provide high-quality legal services at affordable prices. Your first consultation is always free of charge. We welcome inquiries from clients throughout the East Valley, including Queen Creek, San Tan Valley, Gilbert, Mesa, and Chandler. Schedule your free initial consultation by calling 480-878-5998 or using our online contact form.