Small Business Owners and Estate Planning
Like many small business owners, your time is in high demand. Your schedule is more demanding than most and your working hours extend far beyond the typical work day. As if your day-to-day tasks aren’t enough, you have planning and administrative tasks to complete when the day is done. Nevertheless, it is crucial for you to set aside time to create an estate and business succession plan. If you become ill, incapacitated, or pass away, what will happen to your business? Who is authorized to make payroll, pay bills or vendors, and make decisions about your business? How is the property used for the business titled? How about equipment? These are just some of the important factors you should consider.
Authorize a trusted person to act on your behalf.
Particularly if you are the sole owner of your business, you need to give someone you trust the authority to act if you can’t!
- Medical power of attorney: your wellbeing is among the most pressing concerns. A medical power of attorney will give a trusted friend or family member the authority to make health care decisions on your behalf. It is also important to complete a living will, which specifies your wishes for end-of-life care.
- Durable financial power of attorney: this will allow you to choose someone to take care of your business when you aren’t able. This document allows you to specify how you want your agent to act regarding business operations and financials.
Choose a successor and decide how to transfer.
It is important that there is an employee or family member who is trained and able to step into your shoes if you’re unable to operate the business. It is also important to think about what you want to happen to your business when you retire or pass away. Many business owners transfer ownership and management over time to ensure a smooth transition. You should consider:
- Your operating agreement may include restrictions on transfers of your business.
- If you are in a partnership or co-own your business, you may want to consider executing a buy-sell agreement. This document would set forth the rights of each partner/owner in transferring interest.
- Life or key person insurance could provide the necessary liquidity for your beneficiary to purchase your ownership interest in the restaurant is you pass. If you wish to retire, you may want to consider an installment sale. This would allow your successor to purchase the business over several years.
- You may want to consider using a revocable living trust. If you transfer ownership of your business into a trust, you continue to have control during your life. At your passing, your designated trustee will automatically take over and make distributions according to your wishes.
Add business and estate planning to your to-do list!
When you’re working harder than the average person, it’s hard to find time for anything else! You have put precious time and effort into building your business. Give yourself the peace of mind of knowing what will happen when you can no longer take care of everything. Your family, business partners, and employees will thank you for the ease of transition that comes with planning. Call us today for a consultation! We can help you plan for business succession and for your personal estate. (614) 429-1053