You are responsible and prudent in all of your affairs. Because you want to ensure that your family is in a good place financially after you pass on, you have done your estate planning — powers of attorney, wills, trusts and everything they will need to adjust to life without you.
But have you been just as diligent about your business? As a small business owner, your company is your “baby,” too, and needs just as much protection for the day when you are no longer at the helm.
You need a business succession plan for your company
If this is the first time you have pondered it, you may be confused. Surely your spouse (or son or daughter or business partner) will step into the breach and guide your business through the turmoil after you pass away. But without a detailed business succession plan, all that you have worked for could be for naught.
For instance, what if your spouse, son, daughter and business partner all assume that they will individually be running the show at your company. That scenario and its accompanying in-fighting and acrimony could run your thriving business right into the ground — just the opposite of what you intended.
Consider your options for a smooth transition
Here are some options that might be applicable to your situation. Some must be implemented gradually over time while others take place immediately upon your demise. They include:
- Family limited partnerships. This requires establishing both general and limited partnership interests during your lifetime and a gradual transfer of the limited partnership interests to your family while you retain a general partnership interest.
- Selling the business. Your spouse and children may have little interest or experience in running your business and be deeply involved in their own careers. If you were the heart and soul of the business, this might be the best option.
- A buy-sell agreement to transfer your business interest. This is a pre-arranged sale between a planned buyer and yourself. You retain control of your interest until your death, incapacity, retirement or even divorce.
These are just a few potential strategies to examine when doing your estate planning for your business. Your attorney can help guide the process to reach the best solution.