No matter what line of work you are in, getting your own business up and running is no small feat. With so many moving parts to keep track of—insurance policies, employees, taxes—arranging a contingency plan for if something were to happen to you can feel like a low-priority task. But what’s more important than protecting the future of everything you have worked so hard to build?
Every business owner should consider: What will happen to my company if I die? If you don’t have a formal, legal plan in place spelling out who will take the reins when you retire or pass away, you are putting your company’s future in jeopardy and potentially exposing it to substantial tax liabilities.
Basically, businesses need a will, too. Whether you think you might sell the business before you retire or plan to pass the baton to a family member or colleague, a tax attorney can work with you to put a formal plan in writing.
Solid succession plans address the follow topics:
- The transfer of ownership of the business
- Delegation of responsibility and authority to successors
- Decision-making policies (identify potential outside advisors or managers should objective input be necessary)
- Development and training of successors, as possible
- Any involvement or considerations for the owner’s family
- Treatment of current employees
One thing to be aware of is that the value of your business might grow in between the time you finalize your estate planning and when you pass away. For tax purposes, the value that matters is the amount as of your date of death. Certain legal avenues, including trusts and insurance trusts, exist to protect the estate from high levels of taxes, which in turn ensures the full benefits—and limited debts—are passed on to your successors or your family. Consult your tax attorney to put these protections in place and maximize the health of your business for the future.