What is Estate Planning for Small Business Owners?

source: citizensbank24

When a small business owner passes away suddenly, it becomes difficult for the rest of the employees to manage and continue commercial activities in the proper order. Survivors of that business may become directionless, especially if there is no plan for getting along. 

A well-thought-out estate planning for small businesses can show survivors or other partners the direction regarding the future of their ventures. It can help them stay assured that their business will be managed and handled as planned after their sudden death and disability.

Estate planning for small businesses is taking necessary steps for the future of the startup or venture. In this process, you must consider several things in favour of your business, including future ownership, tax efficiency, and mitigation of existing issues.

All these help you ensure the continuous operation of your business even after your death and disability or when it becomes impossible for you to manage your small enterprise.

Here are some reasons why a small business owner should consider making estate planning:

• Passing Over Responsibilities: By doing estate planning for your small business, you can designate a trusted person who will fit in your shoes. All your intentions about the management and transfer of responsibilities stay written. As a result, you can stay assured about the proper execution of your plan.
• Continuity of Service: Estate planning helps your business to float properly after your passing away and, most importantly, according to your wishes. As a result, you can fulfil your professional responsibilities towards your employees and customers. 
• Securing Peace of Mind: You can also stay assured that your families and friends do not need to struggle about how your business will continue. It eases things for your near ones.

If you are about to make estate planning for your small business, here are a few aspects you should ideally keep in mind during the process:

• Create a Will: A Will is a legal record of your statement that contains your intention regarding how you intend to divide or transfer the ownership of your property upon your death. In a Will, you must appoint an executor responsible for executing your declared intentions. The professional will ensure that only the individual you can trust and recommend gets the role of managing your business. 
• Make Your Business Tax-Efficient: Your estate planning for the small business must contain strategies that will help you minimise tax obligations. This is so because you may not want to reduce the share of your profit by paying a hefty amount of tax. Several ways can help you minimise your tax obligations. For example, you can increase the number of digital transactions, invest in marketing, etc.
• Resolve Issues Regarding the Business: You need to ensure no issues regarding the business operation or share of ownership equity. These can result in poor management and improper flow of the business. If there are any such issues, you need to appoint an attorney or a financial advisor to derive the right solution for your business.  
• Draft a Buy-Sell Agreement: An estate planning for your small businesses should also contain the conditions and price for buying and selling of the ownership share. According to this agreement, existing owners get the priority to purchase shares when one owner/partner passes away, retires, or becomes disabled. Thus, by signing the buy-sell agreement, you can stay assured that your business will be in the hand of your existing business owners. 
• Build a Plan for the Succession of Your Business: Proper estate and succession planning for small business owners lets stakeholders ensure a seamless transition of property ownership in case of the death of its present owner. It is especially important for small businesses running in partnership. If it seems challenging for you to make succession planning for your business, you can take the help of a lawyer. They will help you build a Will or trust.
• Update the Estate Plan: Regulations of the country are subject to change, and similar can the intention for transferring the ownership of your business. For example, the person you mentioned as the beneficiary of your Will can become disinterested in your business.There can also be other reasons you may need to update or scrap your present Will. This is why it is better to go through your Will occasionally to see if any change is necessary.
• Get an Insurance Policy for Your Small Business: You also should ideally cover your small business with an insurance plan to secure financial damages. The plan will help you cover the damages and theft of your commercial assets, saving you from booking a loss. There are different types of business insurance plans in the market. You can consider purchasing plans according to the specific needs of your business. As you have built a business with all your dedication, it must be hard for you to leave it in a state of improper management after your death. Estate planning for small businesses is necessary to make directives regarding what will happen with your business when you are not in a condition to manage it. In estate planning, you need to think about the future ownership of your business, resolve existing issues, make your business tax-efficient, etc.