If you're a small business owner, estate planning is something you need to take seriously. Estate planning can help ensure that your loved ones can continue to run your business after you're gone and that they wind up with as much of your estate as possible. Here are some tips for getting started with estate planning for small business owners.
1. Create an Estate Plan
Once a revocable trust, will, power of attorney, and healthcare directive are set in place, your estate plan's basics are already in line. A will or trust are essential components as they prevent your business from being divided by state laws. It’s critical to understand that each case is different, and a trust, will, power of attorney, and healthcare directive may not be enough.
2. Create a Succession Plan
A succession plan details what should happen if you or other key individuals are no longer able to participate in the management of your business. Not only is it important to create a succession plan, but it’s key to also openly communicate about it with your staff and partners. Succession planning runs a lot smoother when it involves working in a co-council with your partners and heirs while alive.
3. Address Estate Taxes
Taxes are never fun. But what’s worse is when a person passes away, and the successor needs to sell a portion of the business to pay estate tax. Each business has a unique situation, so we recommend speaking with an estate planning attorney before handling tricky taxes on your own.
4. Have a Buy-Sell Agreement Ready
Creating a buy-sell agreement can be one of the best things to do in the case of a tragedy. A buy-sell agreement allows any of these things to happen in the case of death:
- Your heirs can inherit the business.
- Your interests can be sold to a 3rd-party, or you can even block the third party from purchasing your interest in the building.
- Your business partners may be able to purchase your interest in the business.
Easing the transition of ownership should be one of your top priorities. Many small business owners put off estate planning because they think it is only for wealthy people with complex financial affairs. However, regardless of net worth, estate planning is vital for everyone. An estate plan can help to ensure that your business is appropriately taken care of in the event of your death or incapacity.
If you are in the Utah area and are in need of help with your small business, just know the Pearson Butler team is here for you. Contact our local office at (800) 265-2314 or fill out a consultation request form on our website to get in touch with one of our estate planning attorneys.