It is important for all of us to have some foresight and plan ahead for what will happen to any of our property or financial assets when we pass away. For business owners this is even more important, and for owners in a partnership or family business even more important still. If left to chance what we want to have happen to our assets when we die, is very different from what actually happens. It is not a fun exercise to complete, but estate planning is vitally important to the pieces and reminders of you that remain long after you are gone. A perfectly strong family business can be hurt severely in future generations due to the negligence of current or past generations. Once you pass away it is out of your hands, thus taking the correct steps now is extremely prudent. Read along to find out what impacts can be had and steps can be taken to ensure that your legacy is something you can be proud of.
Sole proprietor, owner dependent, private entrepreneur, whatever you’d like the call your business the point is you run the show. Focus is on earning as much income as possible through the business and applying it to personal savings. The personal savings and assets accumulated are then what is of most value in being passed to your heirs, while the business dissolves. There is nothing wrong with choosing this type of succession model, but make sure this is a conscious choice and not simply the only resort left to those inheriting the business. One of the biggest benefits of this business model is total autonomy over all decisions regarding the business, use it!
If you would prefer to pass your business on to your heirs, make sure you dictate all of the details in your estate plan. There are innumerable decisions to consider and because of this it is imperative that you get professional assistance with this plan. Are you passing your business to your wife or your children? Do you have any divorces or step children to consider? Will you be dividing ownership among multiple people? Do your successors have any experience or interest in running such a business themselves? These are just a few of the considerations that you will have to consider.
Death, Taxes & Death Taxes
You already know the two certainties in life, and estate planning deals heavily with both. Without an estate plan, your business’s new owner could be on the hook for an estate tax of anywhere from 35-50% of the company’s value. The heir taking over the business needs a way to pay that substantial tax bill, so you will want your estate plan to include a method of reducing that burden as much as possible without having to sacrifice assets of the business.
Contact us at GFP to get things started. We can walk you through this complicated and stressful process.