Blog

What happens to your business when you die or become disabled?

March 15, 2018

As a small business owner it is easy to get bogged down in the minutia of the day-to-day. I know, because I am a small business owner too. It’s import, though, to take a step back every once and a while and examine the future of your business. Most small business owners look ahead and plan for the new goals they will hit when they go through the exercise of planning. Have you ever planned what would happen to your business if you were no longer at the helm? This is often overlooked, but it is vital for you to protect what is possibly your greatest asset from your own illness or death.

If you have ever dealt with the death of a family member you can probably attest to the difficulty of transferring all the assets and wrapping up your loved one’s estate. If you did help wrap up an estate and there weren’t any problems you should thank your loved one for setting up the plan that made it so smooth. If you did have any hiccups in administering an estate though, you can only imagine how difficult it would be to manage an estate in which one of the main assets is a small business. If a poor plan or no plan at all was created for that small business, this will create an issue for customers, potential customers, employees, and ultimately the family of the business owner.

Here are a few ideas that can help you plan for your possible death or incapacity, as it relates to your business

  1. Create the right business documents: If you have created business documents in the past, it was probably mainly for tax reasons, so that you would have a cleaner tax return, etc. The proper business plan, however, can do much more than streamline your tax issues. The proper business plan will include a buy-sell agreement that helps determine: how a sale is conducted, whether surviving family members have the option to buy if the business owner is deceased or incapacitated, and whether some individuals will be specifically excluded from the right to purchase parts of the business or participate in the business at all.

  2. Create the right Estate Planning Documents: A will (or more commonly a Trust in California) will direct your survivors how assets should be transferred at death and how to care for your assets should you become incapacitated and can no longer care for these assets. It is especially important to create a trust for business owners because the trust can allow the people you choose to continue a business if you have become incapacitated, where a will only allows the executor of the will to take over after you have passed.

  3. Purchase additional insurance: There are insurances specific to business owners that can allow your business the funds it needs to keep operating in preparation for a sale should you become incapacitated or die.

  4. Talk to an estate planning attorney: Small business owners need a top-notch estate plan because operating a small business while the owner is incapacitated or after the owner dies is so much more difficult than administering a regular estate plan. If you are local, give us a call.

     

     

     

     

     

     

     

     

     

 

Share on Facebook
Share on Twitter
Please reload

Featured Posts

The Not-So Silent Threat to Your Estate Plan

January 15, 2019

1/2
Please reload

Archive
Please reload

Follow Me
  • Grey LinkedIn Icon
  • Grey Facebook Icon
  • Grey Twitter Icon

29970 Technology Drive, Suite 217

Murrieta, CA 92563

10620 Treena St, Suite 230,

San Diego, CA 92132

Tel: 951-304-3431

Tel: 858-413-9518

  • LinkedIn - White Circle
  • White Facebook Icon
  • White Twitter Icon

© 2020 by The Ashcraft Firm

This is Attorney Advertising

Nothing contained herein should be considered legal advice.

 

Note: In accordance with Section 528(b)(2) of the United States Bankruptcy Code, readers of this message are advised that THE ASHCRAFT FIRM is a DEBT RELIEF AGENCY whose services may include helping people file for relief under the Bankruptcy Code.

 

IRS Circular 230 Disclosure: To ensure compliance with IRS's requirements, please be advised that any tax advice contained in this communication (including any attachments) is not intended or written to be used or relied upon, and cannot be used or relied upon, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.