Estate Planning Tips for Small Business Owners & Entrepreneurs
BY: JACQUELINE CAO ON WEDNESDAY, JANUARY 10, 2018
Most of us don’t like to think about estate planning, especially while we’re young but it’s essential if you’re an entrepreneur. Having a set plan will allow your business partners or family members to manage the business and continue to operate with minimum interruptions.
A lack of proper planning may lead to disputes or the inability to run daily operations. According to the professionals at Walnut Creek Estate Planning Attorneys, consulting a lawyer is always a good idea and also helpful when creating a will, setting up a buy-sell agreement and drafting a power of attorney. Here are a few estate planning tips for entrepreneurs and small business owners.
Write A Will
Many people put off writing a will until they are seriously ill or of old age. It’s imperative to draft a will if you have a business or a formidable estate because without one, your assets may be distributed according to your state’s interstitial laws. Drafting a will will let you name the executor of state who will be responsible for managing your business. It will also allow you to leave assets to the exact individuals you would like to.
Set Up A Buy-Sell Agreement
Businesses with several owners may want to set up a buy-sell agreement. This document will redistribute the owners assets in the worst case scenario. You may want to consider a stock redemption or cross-purchase agreement which will allow the remaining owners to split the assets. You will also want to consider if the value of the business should be calculated by income, market or asset approach.
Draft A Power Of Attorney
If you’re a sole proprietor you may want to provide the executor with access to your business banking information and passwords to your social media accounts and email accounts. This will enable the executor to continue running your business.
Create A Living Trust
Creating a living trust avoids the successor having to go through the hassle of probate court. Going through probate can be a costly and complex process as well as time consuming. Businesses who want to protect sensitive information may also want to avoid this process.
Trusts can be flexible in terms of how assets are distributed and can be modified depending on business demands. For example, one can stipulate that heirs only receive funds after they’ve reached a certain age. A trust can also allow a designated individual to handle business affairs in case the trustee is incapacitated. Having a revocable trust allows business to continue operating.
Create A Succession Plan
Having a succession plan in place is imperative in order smooth transfer of ownership. This should include names of those who will maintain executive functions and how to deal with family members.
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