How to Incorporate Your Business into Your Estate Plan if You’re a Small Business Owner
Do you have a plan in place for your business after you die? Do you know what’s going to happen to your business if you do not plan properly? Your planning now will dictate whether or not your company will continue to thrive after your gone.
If you do not incorporate your business into your estate planning documents, your family and business partners may be left without any direction. If you want your business to flourish after you are gone, you need a smart estate planning strategy.
Below are some estate planning tips for small business owners in Florida and things you should consider before finalizing your documents.
Properly planning and incorporating your business into your estate plan can minimize the amount your estate will owe in taxes after your death. Whether you are concerned with capital gains taxes or estate taxes, it is important you have enough liquidity to cover those taxes due after your death. Since some business assets are not liquid, surviving family members may need to sell the business to pay taxes. However, thorough estate and business succession planning can help minimize taxes for your small business.
You Can Establish a Buy-Sell Agreement
When creating estate planning documents, you can establish a buy-sell agreement, which is a contract between business partners or shareholders that sets forth a plan for the business in the event of its owner’s death or incapacitation.
The buy-sell agreement will establish a sale price for your small business and your share of the company. In this contract, you can also specify whether you want:
- other business partners or shareholders to buy out your share;
- your heirs to sell your portion; or
- block certain persons from having a role in the company.
Choosing Your Successor if You Are a Sole Proprietor
If you are a sole proprietor, your business becomes a significant part of your estate after your death. Your estate plan should establish a clear plan of action for your small business after you are gone.
As part of business succession, you can delegate and prepare your successor if you are planning to pass on the business. However, if you want to sell the company, your estate plan should express your wishes clearly, and provide a less stressful and costly plan for your heirs.
Dividing Your Business Assets
If you have a family-run business, some of your heirs may be involved in the company, while others are not. How do you divide assets between these two groups? If some of your heirs, who are already involved in the business, take over the family-run enterprise, would you like other, uninvolved heirs to have an equal share? Or should the involved heirs buy out the shares of uninvolved family members?
When your business is one of your assets, you need a solid asset protection plan to make sure that your company remains on the right track after your passing. Having an estate plan allows your business to have a smooth transition. Get more tips from our St. Petersburg estate planning attorneys, who will help with estate and financial plan coordination. Contact Legacy Protection Lawyers, LLP, to get a case evaluation. Call at 727-471-5868.