If you own a business, it’s probably one of your most valuable assets, if not the most valuable. Your business is the culmination of a dream, a major source of your income and in some cases the primary livelihood for others. According to the folks at RocketLawyer.com, it therefore makes good sense to put together a business estate plan that covers your company’s assets, trade secrets and organizational structure so that forces beyond your control don’t slow it down.
Business estate planning covers all the bases against your death or that of a partner. It can also define what will be done if a business partner decides to leave the firm. In either case, you should begin by deciding what should happen in such situations. You can implement a buy-sell agreement, a formal document that protects all the partners in a business when one of them passes away or decides to sell their share of the company. The agreement establishes whether a new partnership will be formed or whether the business simply gets dissolved.
In any business with two or more partners, everyone should put their heads together to decide how this situation is resolved to the benefit of both the business and the key stakeholders in it. A successor might be chosen, for example an heir of the deceased partner, or the owners might retain the right to reject that option if it’s not in the best interests of the business. Some estate planners recommend that partners take out life insurance policies that can be used to buy a deceased partner’s shares from his or her estate.
Estate planning is also a good time to establish what the business is worth and what value you as the owner bring to it. If you liquidated everything, inventory, computers, furniture, what would you be left with? And what about business relationships and arrangements that keep the business moving efficiently, vendors, bank accounts, lines of credit, social media and so on? If you’re the only person running the business, you might forget about the online bank accounts, email accounts, file sharing sites, social networking accounts and such that might be inaccessible if you weren’t there to furnish the usernames and passwords. A documented plan should be in place to preserve and transfer this knowledge to prevent a perfectly healthy business from taking an unfortunate tumble.
Overall, estate planning for a business is just as important, perhaps more important, than estate planning for an individual’s personal property. The larger and more complex your company, the more you might want to consider speaking with an attorney to get a fresh set of eyes evaluating your needs, and the needs of your business and your partners. Since life is full of constant changes, you’ll also want to revisit your business estate plan every few years to account for marriages, children and the ever-changing situations of your company’s stakeholders.
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