Why Business Succession Should Be Part of Your Estate Plan
Most people don’t like to think about what will happen with their assets upon their death, but ignoring estate planning could result in unexpected ramifications for business partners, employees and family members of the owner after their passing. The average American small business owner is nearly 55 years old and has a net worth of $11.7 million, with family business owners enjoying an even higher average net worth of $17 million. Working with a Hackensack, New Jersey estate planning lawyer to establish a business succession plan will give you peace of mind and help your staff, partners and family know what to expect in the event of your untimely passing.
What a Business Succession Plan Could Include
A business succession plan may include all of the steps needed for a systematic transfer of the ownership of your company. It also should include a business management plan. Each business will have a unique plan for succession after the owner’s death. At minimum, your plan should include details about the development, training and support of your successor. The delegation of authority and responsibility to your successor is also a crucial part of the plan.
Have a plan in place for retaining your most valuable employees and business partners or vendors. You may need to add information about coordinating activities between the owner and manager of the business and the interests of your family if you are leaving your business to someone else.
Ongoing Income for Your Family
If your family assists in the operations of your business, you may want to pass it on to one or more of your family members upon your death. This is a helpful strategy for continuity of operations as your family members who already work for the business know the ins and outs of how it operates. Your family members will also likely understand your strategy and plans for future growth, and they may be more likely to follow your wishes for the business you started.
Establish a Legacy
Including business succession in your estate plan is a good way to establish your legacy. For many people, it’s important to leave something behind that’s tangible, memorable and important to others. You worked hard to establish and grow your business, and leaving it to a family member or partner who is fully invested in and supported your endeavors from the start is the best way to continue what you started when you opened your business.
Consider Establishing Co-Ownership
Another way to plan for the succession of your business is to set up co-ownership. You could do this with an existing business partner or a dedicated employee. This can be done through a buy-sell agreement. It ensures that your family members don’t inherit your business. This is a good arrangement if your family isn’t interested in running your business after your passing and doesn’t want to become unintentional business owners.
Consider the Tax Implications
One of the most important considerations in business succession is the issue of taxes. Keep in mind that between when you plan your business succession and when you die your business could grow in value. That growth could have an impact on the inheritance taxes owed. It’s best to work with an attorney for estate planning and an accountant who handles complex business taxes in order to gain a full understanding of the current and potential future tax implications for your business succession plan.
Creating a business succession plan requires some careful thought, and the process is easier with the help of an estate planning lawyer. To schedule a consultation in Hackensack with The Knee Law Firm, call us at 201-996-1200. You may also fill out our online contact form, and one of our associates will reach out to you.