Article
Most individuals would benefit from a thoughtful estate plan which
includes a power of attorney to manage your financial affairs, a will to
determine who inherits your assets, as well as other documents. Business
owners have unique concerns when crafting an estate plan. Owning a
business, or an interest in a business, adds a layer of complexity and
requires nuanced planning. Seek an attorney and financial advisor who
understands these unique issues to business ownership. Some points to
consider when creating your plan include:
What happens to my business if I am incapacitated?
A power of attorney gives someone the power to manage your assets.
When giving someone power of attorney, find someone you trust to
capably (and honestly) manage your finances. If you own a business, you
also need someone who can manage this asset. Below are some key
questions to ask yourself:
-
Does this person have the experience to run the business?
If not, does he or she have the capacity to outsource?
-
Does this person know the key people?
If he does not know the key people in your business, consider
introducing everyone before you are in trouble to ensure a comfort level. -
Does this person get along with the other owners and employees?
A person acting on your behalf will need to be able to work with the
necessary people as well as protect your interest, which becomes
especially important when you are in business with your family.
What happens to my business when I die?
Be sure to consider the likely outcome for your business when creating
your estate plan. Your will determines who will receive your business after
your death and also appoints the personal representative who distributes
the assets from your estate according to the terms of the will. If you are a
business owner, your personal representative has three options: (1) wind
down the business, (2) sell the business, or (3) distribute the business so
the business can continue. Consider the following:
-
Does my personal representative have the ability to manage
the transition ofmybusiness?Liquidating or selling businesses is not an easy task. Also, serving as a
steward of the business before the business is transferred from the
estate requires skill. Be sure the person you name as personal
representative can manage this process. -
Consider your existing business documents.
These agreements may affect the ultimate disposition of your business.
You may already have a buy-sell agreement or an operating agreement
in place. If not, you may also want to have these documents drafted as
part of your estate planning process. -
Who should inherit the business?
If only one person will inherit the business, is that a fair outcome? If you
are concerned the outcome will not be fair, you may be able to leave
other assets to other individuals in order to provide fairness. Also, many
family businesses have multiple owners who are not employees. If you
choose to have non-employee owners, your family will need to have a
plan in order to balance the interests of the employees and the owners.
Discuss estate planning issues with your family, your business partners,
and your advisors in order to create the optimal plan. Thinking through
these challenges in advance and creating a solid plan will help protect
your loved ones and your business.
