Estate Planning for Small Business Owners

Estate planning

Small business owners face distractions at every turn. From handling marketing to hiring staff and invoicing customers, there’s always something happening. It’s no surprise that nearly a third of all small business owners don’t have an estate plan. Even the ones that do haven’t updated it recently.

Estate planning for small business owners ensures your business is handled according to your wishes if you become incapacitated or die. The matter of death is one that no one is comfortable talking about, but proper planning protects your business – the thing that you have put so much time and money into creating. This is particularly true for family businesses when you want to ensure your children inherit the business.

The estate planning process can be long and arduous for business owners, but it is still worth doing. There are some things you can think about to reach a decision on how your estate should be handled after you die.

What Makes Estate Planning for Small Businesses Important

People don’t put together a real estate plan because they find the topic too uncomfortable to deal with. No one wants to imagine a scenario in which they aren’t around to run their business.

With that said, estate planning serves two critical purposes; it ensures your business goes to someone you trust, which does right by your customers. Planning also puts your wishes in writing, making it more straightforward for your loved ones to understand and deal with the situation if something happens to you.

For business owners, their business likely accounts for a majority of their net worth. It’s crucial that you make arrangements for how your business will be dealt with if you die or become incapacitated. If you don’t take the time to plan appropriately, then there’s no telling what could happen to the business you’ve dedicated your life to creating.

The Eight Steps of Estate Planning for Businesses

Estate planning can be a long process, especially when estate planning for a business. There are many questions and potential scenarios to consider. Estate planning means thinking about hypotheticals. You should never attempt to create an estate plan all by yourself. One small mistake could cause years of litigation or mean that your business isn’t handled correctly. You should talk to a financial advisor and estate lawyer with experience in planning estates.

There’s more to estate planning for small businesses than just putting together a will. Entrepreneurs need to approach organizing their estate from multiple fronts. What starts with traditional planning, such as creating a will, evolves to include planning for disability, naming a successor, planning for tax efficiency, and more.

Here are the eight critical steps to estate planning;

  1. Start by creating a basic plan and will
  2. Plan for tax efficiencies
  3. Resolve any issues with your family-owned business
  4. Put together a buy-sell agreement if needed
  5. Invest in disability and life insurance
  6. Create a set succession plan
  7. Discuss the estate with affected parties
  8. Regularly check and update the plan as needed

Don’t Delay In Creating a Business Estate Plan

No one should overlook the importance of estate planning, but it is particularly essential for small business owners. You have dedicated your life to your business, and it has become your biggest asset and proudest accomplishment. Create an estate plan to continue protecting your business after you pass and ensure that it lasts for generations to come. Estate planning begins with writing a will, but the process is more complicated for business owners. Talk to an estate lawyer to get started managing your estate and planning for the future.

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