You’ve worked hard for your business, and you don’t want to settle for less. Estate planning is a field of law that can greatly benefit business owners through key documents, legal strategies, legal tax minimization, and more. In this guide, we will discuss the basics of business estate planning. If this article seems like it is applicable to you, contact an estate planning attorney to learn more about how you can prepare your business for a future without you.
Estate Planning For Businesses
If you die and do not have a business succession plan in place, it is your business, family, and friends who will be left without direction. The execution of a deceased person’s last will and testament after their death can be tricky, but it is made far easier with a properly-executed, clear estate plan.
Estate Planning Strategies For Small Businesses
There are millions of small businesses in America, and they all should have an estate plan in place. When it comes to strategies for small business estate planning, here are a few you should note:
· Taxation Minimization
· Buy-Sell Agreements
· Family-Run Business Strategies
· Sole Proprietorship Strategies
We will discuss each of these in turn below.
One of the best reasons to have a business estate plan is to minimize how much your estate will owe the IRS after you die. The IRS can tax anywhere from 35% to 50% of your business value after you pass, and that hefty sum is due nine months after the date of your death.
This often means that small businesses end up having to sell to pay off this burden. But, if you know your way through the IRS laws, you can minimize your business’ tax burden, 100% legally. An estate planning attorney who is trained in tax law can help you take advantage of IRS code sections and exemptions. This sector of estate planning will pay off handily in the future for your loved ones and employees.
Having an insurance policy is a part of estate planning, as it can provide necessary capital to your beneficiaries (who, in some cases, may be your business partners) after you die. According to experts, there are three insurance coverage policies you should have, if you have a small business. These include:
· Worker’s Compensation Insurance. In certain circumstances, this insurance provides employees with financial, medical, and wage benefits if they are injured on the job.
· General Liability Insurance. This policy provides protection for your business in the event of claims against it for bodily injury and other liabilities.
· Professional Liability Insurance. Common among lawyers, doctors, and others in professional capacities, this business insurance covers professionals against customers’ or clients’ claims of negligence, personal injury, copyright infringement, and more.
This type of contract establishes a plan for your business in the event an owner dies or becomes too sick to work. The buy-sell agreement establishes a price for your company and your shares of it, and it allows you to document what you want to happen to the business after you die or cannot work anymore. Establishing the business’ price through a buy-sell agreement goes a long way towards convincing family members that they are getting the fair end of the deal, should the company sell or your business partners buy out your stake.
Family-Run Business Strategies
If you own a family-run business, have you thought about how you want to divide your company’s assets? Many estate plans distribute assets to heirs based on contribution levels, experience, and other factors. An estate planning attorney will help you consider how to best strategize your business’ future, taking into account your family and personal situation.
Sole Proprietorship Strategies
Sole proprietors know that they are their business—their personal and company assets are not separated. More than any other type of business owner, sole proprietors need a clear estate plan for what will happen to their company after they die.
If you have a small business with no estate plan, it is time to speak to an attorney to ensure that, if you die or something happens to you, all that you’ve worked hard for is protected. Contact a WFP attorney today.