Small Business Estate Planning: 7 Things You Need to Know
What would happen to your business if something happened to you or one of your partners? It is vital to formulate a plan for succession or selling interest in your business. You must carefully consider your business’s viability without your leadership as well as potential market value. If you have questions or need assistance developing a plan call your LegalShield provider law firm. Business Entities – If your business is a sole proprietorship it will have to close and liquidate assets if you are unable to work. Partnerships, LLCs and corporations require more advanced planning. It is important to discuss issues of succession with your partners or co-owners when you begin a business rather than waiting for a health crisis or other life event. Buy-Sell Agreements – A buy-sell agreement allows co-owners of a business to set terms for what will happen if a partner dies, becomes disabled, divorces a spouse or decides to leave. The agreement should define who is eligible to buy a controlling interest in the business, the specific events that would lead to a sale and the amount to be paid. A buy-sell agreement can help avoid disputes and expensive legal battles that can destroy the business.Shareholder or Operating Agreements – Shareholder agreements for corporations and operating agreements for LLCs may also include provisions to restrict the transfer of member interest and limit control of the business. Talk to your LegalShield provider attorney to find out what is best for your business. Personal Estate Plan – Make sure you have a personal estate plan in place to protect your family. A last will and testament is just one of the benefits of the LegalShield family plan. For more information on the LegalShield family plan, contact member services at 1-800-654-7757. Insurance – It is possible to purchase officer life insurance or key person insurance to help protect the company if an owner, operator or other vital employee dies. Officer life insurance can be used to buy the deceased partner’s interest in the company or help provide sufficient capital to keep the business running. Key person insurance can be used to hire a replacement employee or mitigate the loss of a critical employee. Premiums may be prohibitively expensive for some businesses. Talk to a qualified insurance agent to learn more. Taxes – It is important to consider the tax implications of your agreements and insurance policies. Talk to a tax professional to discuss the pros and cons of various policies and agreements. Make sure you understand what type of insurance premiums are tax deductible and that you know how any payout on a policy will be taxed. Important Documents – Make sure all of your signed agreements, your estate plan and insurance policies are kept in a safe location where they can be accessed should something happen to you. Provide your family and your business partners with the information they need and copies of any documents that may be required to carry out your plan. Talk about your wishes to ensure there are no surprises.