Estate planning is crucial to your business and family’s future. If you are strategic in how you establish the different aspects of your estate, you can help ensure your company’s success when you are no longer involved.
Here are three key elements of your estate planning if you own a small business.
Create a buy-sell agreement
In case of an incapacitating disability, retirement or death, your partners can buy your share of the business at a previously agreed-upon price through a preestablished buy-sell agreement. This agreement could also dictate if an heir can take on your share of the business or if a third party can purchase your share.
Develop a business succession plan
A business succession plan dictates who will take over your enterprise. It is a vital, directive framework used along with your will or trust and your buy-sell agreement. It can become especially important if you are the sole owner of your business.
Purchase disability and life insurance
You can purchase a disability and life insurance policy that names your family or heirs as beneficiaries and another policy that names your business partners as beneficiaries. These policies provide financial support for your family and financial assistance for your business partners to buy your company shares or carry out your wishes for the company after your death.
Proper estate planning that takes your business into account can help minimize your heirs’ tax responsibility or even help facilitate the purchase of your business to a desirable buyer. Because it is typically advantageous to complete your estate planning in advance of any situation that would require one, you should consider establishing your plan sooner rather than later.