You put a lot into establishing a business. You gather your life savings to build your empire and run a successful organization. You must plan ahead for your business to make sure it stays safe and keeps flourishing.
Estate planning involves putting formidable strategies in place to ensure that your business is in the right hands after you pass away. Effective and successful planning involves a detailed discussion with your lawyer from a South Carolina law firm and financial advisors.
Tips for effective estate planning:
- Buy-sell agreements.
When businesses have more than one founding partner, they may not need to find new owners after one co-owner dies. In such cases, the co-owners may choose to sign a buy-sell agreement where they buy out the deceased’s portion of the business. The deceased’s beneficiaries receive the payment from selling a portion of the business. This agreement is put forward to ensure the stability of the business as it does not involve handing the company to someone else.
- A succession plan.
Businesses with only a single owner or founder need to create a succession plan with details of who will handle the company after the initial owner’s death. A succession plan should include the transfer of management and ownership of the business. A detailed plan includes names and responsibilities of each successor, their training, outsider advisors and directors, who will take the decisions of the business, etc.
- Tax planning.
Tax planning is an essential part of your estate planning, as your tax obligations may affect your business and beneficiaries after your passing. If your estate is valued at over $11.7 million, you are required to pay taxes to the IRS. Without proper planning, unexpected tax obligations can harm your business. Your company may be forced to sell assets to pay the taxes. Therefore, you should work to lessen your company’s tax burden through planning; otherwise, it may later disrupt its long-term growth and success.
- Sort out family issues.
Family issues in businesses are not very uncommon. If you are a single owner and have more than one child, you will need to divide the business equally to avoid disputes after your passing. If there are multiple owners, the number of potential successors increases even more. An attorney and financial advisor can help you address such issues. They can suggest ways you can be fair to all of your successors and avoid future disputes.
- Life insurance.
If you have a small business, life insurance is a must. Life insurance can provide your family with a stream of income after you pass away. Make sure you read the insurance company’s policies so that your family’s financial needs are properly taken care of after your death.