When most people create an estate plan, their primary focus will be on the allocation of their personal assets and the protection of their dependent family members, including minor children. Fewer people stop to think about the long-term implications of their role in the family business or in a small business they own and operate alone.
If your business represents a substantial amount of value, if you hope to pass it along to one of your family members or if you hope that they can sell the business and profit from it after your passing, you will need to consider your business during estate planning. This ensures that the business can continue operations when you either die or become incapacitated and unable to manage it on your own.
Have you addressed the legal transfer of ownership for the business?
Depending on how you structure your business and how many other people have an ownership interest in it, there are many ways in which you can transfer full or partial ownership to someone either while you are still alive or as part of your estate plan.
It may also benefit you to create a power of attorney document that authorizes someone to operate the business and handle necessary financial and legal transactions if you become unable to do so while still alive.
Taking those steps now will help ensure that someone has the authority to continue business operations when you no longer can. In some cases, you may need to negotiate with stockholders or other owners of the business when you seek to transfer your personal interest to someone else.
Have you created a succession plan for the person taking over your role?
In addition to ensuring that someone has the legal authority to manage your business, you need to make sure they have the information and knowledge to do so.
A business succession plan often involves outlining your knowledge and responsibilities for the company in detail so that someone could follow your instructions to take over your role. It also involves identifying either candidates who would serve as an adequate replacement or at least the qualities that those candidates should have.
Thorough succession planning will make it easier for people to take over the company or to find someone capable of doing it after you cannot anymore.
