As a small business owner, you have poured your adulthood into building your business and growing it. You probably think that you have everything covered when it comes to the business, but there is one thing that you might have missed — your estate plan.
You aren’t going to live forever. You need to have an estate plan that includes the business. This process can range from simply if you are the sole owner of the company to much more complex if you have business partners. Consider these points to determine what you need to do:
Think about the money
If you want your loved ones to use income from the business for support, you can’t force them to fork over costly estate taxes. These taxes can cost anywhere from 35 to 50 percent of the estate. You can keep the cost of these taxes to a minimum by making sure that you take advantage of specific tax breaks and other options.
The way you reduce the estate tax depends on the circumstances of the business. You might be able to reduce the value of the share of the business you hold. Give stocks to family members and friends in a way that meets the requirements of the law.
Plan for the transfer of ownership or management
Making plans now for the transfer of ownership or management can smooth things over when it is time to put the plan in action. Ideally, you should work with the person who is taking over to make sure he or she is familiar with the inner workings of the company.
If you are the sole owner of the business, you might consider setting things up using a living trust. This will make the transfer of ownership easier for everyone involved. Other options are possible if you aren’t the sole owner of the business, but they will require you to work with the co-owners of the company.
Get the paperwork in order
Determine what paperwork you need to have in place to make it easier for the person who is taking over the company to get things done as quickly and painlessly as possible. One of these documents should be information about where the business has accounts, usernames, passwords, account numbers and other important information. Be sure to keep this in a secure place. Some people opt to use a two-part system where two different people each have certain bits of information. One of these people should be your attorney.