Between taxes and ex-spouses, you'll want to do an estate plan to protect your business or it may pass soon after you do.
It's amazing how quickly a business can get picked to pieces after the death of an owner. With the use of good estate planning, according to The Huffington Post article, "5 Things Estate Planning Can Do for You and Your Business," you can protect your business and your legacy. Otherwise, your business is at the mercy of government taxes, co-owners and even family members who will stake their claims.
Use estate planning to avoid unfortunate events and to prevent seizure and depreciation of the business assets. This can decrease the stress and hassles that occur immediately after you die. Here are some good estate planning ideas to help protect your business.
- More options for your business. Solid estate planning gives you the option of buy-sell agreement. If your business has one or more co-owners, this agreement ensures that upon the death of any owner, the interest of the deceased is automatically purchased by the other owner(s). The beneficiaries of the deceased owner, such as the spouse, children, or other family member won't unintentionally become owners. This strategy can alleviate some stress in an already stressful situation, immediately after the death of an owner or part owner of a business.
- Guarantee the longevity of your business. Sole proprietors, small businesses, and big companies all want to pass their enterprises to future generations to keep their legacies alive. Estate planning can ensure the longevity of your business with a business transition plan.
- Minimize taxes. A business owner can transfer business assets to his or her children and retain a source of income by establishing a grantor retained annuity trust (GRAT). This will help make sure that when business assets grow over time, the appreciation in equity and value of your business will not be hit with huge tax bills.
- Succession planning for your business. Good estate planning will ensure that your business is preserved and operating the way you'd want it to run. Any issues in the transfer of management and ownership when you're gone are conducted effectively with wise estate planning.
- Start your planning now. Yes, now. It can take years to develop a succession plan. While doing so, you will develop a long-range view for your business, which may yield valuable information for the business's continued growth. It will also provide you with peace of mind if legacy planning has always been a goal for your business.
Reference: Huffington Post (March 31, 2016) "5 Things Estate Planning Can Do for You and Your Business"