If you are a business owner, your focus is likely on keeping the company running on a daily basis. Of course, this is important, but looking beyond today to what will happen if you can’t run your business should be on the top of your to-do list.
If you die or become incapacitated without a plan in place, you will leave your heirs without clear instructions on how to run your company. This can jeopardize the business you worked so hard to build. The right plan can help keep your business running regardless of what happens.
Execute the Proper Business Documents
If your company has several owners, a buy-sell agreement is a must. This contract will outline the agreed upon plan for the business should an owner become incapacitated or die. Provisions in the buy-sell agreement may include:
● how the sale price for the business and an owner’s interest are determined,
● whether the remaining owners will have the option or requirement to buy the incapacitated or deceased member’s interest, and
● whether certain individuals can be blocked from participating in the business.
Execute the Right Estate Planning Documents
A properly executed will or revocable trust will allow you to state how you would like your assets to be transferred — and who will receive these assets — at your death. A will or a trust also lets you identify who will take charge of the assets and manage their disbursement (including your business interests) according to your wishes.
Although a will can be used to pass assets at death, creating and properly funding a revocable trust allows any assets owned by the trust to bypass the probate process, making the distribution of assets to heirs much faster and more private. It may also reduce the legal fees and estate taxes your heirs will owe.
Additionally, a revocable trust can help your loved ones manage your trust assets if you become incapacitated. While you are alive and well, you typically act as the trustee of the trust, so you can manage your business and assets with little change from the way you do now. But unlike a will, a trust allows your successor trustee to step in manage things if you become incapacitated. This process avoids court involvement, allows for a smooth transition of trust management (which can be very important if your business is an asset of your trust), and proper continuing care for you in your time of need. Although having a will can be a great way to start, most business owners are much better off with a trust-based estate plan.
Having a plan for your business in the event you are unable to continue managing the company is essential to keep the company going. We can explain the many options you have to protect your enterprise so that you can focus on what you do best — running your company.