Business owners understand better than anyone that there are not enough hours in the day. With all the time, effort, and duties surrounding owning a business, a business owner can get overwhelmed with the number of items on their to-do list. Often a business owner will overlook one legal area that may ultimately be most important: estate planning.
Business owners work hard to build their businesses. This is usually done with the goal of providing for their family. However, without some estate planning, if the business owner passes away, all the hard work will not have been worth it because the family will not be protected.
The first estate planning tool for a business owner to consider is a buy sell agreement. This is an agreement that governs what happens if an owner dies or chooses to leave the business. This protects the interests of all owners. By agreeing beforehand how to handle these situations, the owners reduce the risk of lawsuits or other issues which could harm or ultimately ruin the business.
Next the business owner must consider estate planning documents that apply if the owner is incapacitated. This includes powers of attorney and advanced directives. A power of attorney is an authorization for someone to act on behalf of another regarding that person’s financial or legal needs. If an owner is incapacitated, then someone needs to have the power to make decisions and keep the business operating until the owner is able to do so himself or herself. Advanced directives are a set of written instructions for taking care of the health care decision of someone who is incapacitated. This helps ensure that the wishes of the owner regarding the medical they would receive if incapacitated are followed.
Finally, the business owner should make a will and consider using a trust, family limited partnership or LLC for certain property. This ensures that the business owner’s assets are divided between his or her heirs in the way that the business owner believes is best. The estate planning tools used by the business owner may have significant tax consequences.
In making any of these estate planning decisions, a business owner should consult an attorney to decide what would be best for his or her circumstances.