Owning and operating a small business is the dream of many Americans. Through hard work and dedication, this dream comes true for many people. Unfortunately, if the small business owner becomes incapacitated or dies without a Business Succession Plan, all of the hard work by the small business owner could be lost. Having a Business Succession Plan as part of your estate plan ensures that the business you worked so hard to build will continue to operate even though you are unable to manage the business.
Important Reasons Why You Need a Business Succession Plan
Estate and Gift Taxes
Leaving the family business to your heirs is more complicated than you may imagine. Estate and gift taxes may apply in some circumstances. Having a Business Succession Plan can help reduce the taxes owed or, in the event estate or gift taxes do apply, the plan can provide for payment of those taxes so the taxes are not a burden for your heirs.
Does Your Family Want to Continue Your Business?
It may be difficult to accept but your family may not want to continue your business after your death or incapacitation. You need to have an honest discussion with your family members to determine how they feel about taking on the responsibility of continuing your business without you. Your Business Succession Plan should consider your family’s feelings as well as your own desires for your business.
What is the Type of Business Entity?
The type of business entity makes a difference in how you transfer your business. The Business Succession Plan takes into consideration whether your business is a sole proprietorship, a partnership, or a corporation. If you operate your business as a sole proprietorship, you have sole control over the assets of the business and can transfer those assets in whatever manner you desire. However, if you have a partner or you own shares in a corporation, the manner of transfer will be much different.
Does Your Family Need to Hire Someone to Operate Your Business?
In some cases, your family members may not be equipped to operate your business. For example, if you own a plumbing company but no one in your family knows anything about plumbing, the wisest decision may be to hire someone to operate the business. A Business Succession Plan can provide valuable information about how your family can continue to operate your business in your absence. You can answer many of the questions that your family may not even know to ask.
Do You Want to Liquidate Your Business?
If you want your business to close upon your death or incapacitation, your Business Succession Plan will outline how your business should be closed and liquidated.
Your Business Succession Plan should mirror what your other estate planning documents dictate for your business after your death or incapacitation. Hiring an experienced estate planning attorney to ensure that your legal documents are in order will make it much easier for your family should anything happen to you.
Do You Have Questions About a Business Succession Plan?
Krause Donovan Estate Law Partners, LLC is a Madison, Wisconsin estate planning and probate law firm focusing on matters related to wills, estate planning, trusts, and probate. Our attorneys personalize their services to meet the needs and goals of each client. We can even arrange for a home visit if you are unable to come into our office. Contact our office at (608) 344-5491 to schedule a consultation or use our online contact form.