It can be very simple to create an estate plan for a family. Maybe all you need to do is decide to leave everything to a spouse or child, which makes the process of creating a will or trust easy. However, owning a small business can complicate things in a big way. That's why it will help to know what to consider as a small business owner when creating an estate plan.
It is vital to think about succession planning when you own a business. This involves identifying someone who will eventually take over the business in one of several situations. You may retire, become disabled and unable to work, or die unexpectedly.
You'll need to spend some time picking someone within the company that can help make a smooth transition to the owner when they eventually take over. Then you'll need to prepare them for the responsibilities that they will have. Of course, it's important to have a backup plan as well, because it's possible that your hand-chosen successor will not want to take the job when the time comes.
Part of putting a business in your estate plan means that you need to place a value on it. This can't be something that you pull out of the air, since thought needs to go into how much the valuation of the company really is. You may need to bring in a professional to handle the valuation for you, especially if it's something you never really thought of before. Having a valuation will help guide future decisions that are related to the division of assets, taxes, and buy-sell agreements.
You may want to protect your business by getting key person insurance. This is a special type of insurance that is used to protect the business if a key person were to suddenly become disabled or pass away. Having a key person insurance policy on your can provide many benefits that you were not aware of.
There is financial protection in the form of a payout that can be used to cover training, lost earnings, and debts as well as maintain cash flow. The business will be able to continue running during the difficult transition period and provide stability for employees so that they do not leave the company. You'll also have protection from creditors as well because they'll know that the company has the financial means to pay back debts.
Contact a local estate planning lawyer to learn more.