It takes years of hard work to build a successful business and once created, most business operators can see themselves at the helm, directing operations for years to come. Unfortunately, most business operators do not plan for the unwanted event of death, which can lead to the destruction of what has taken years to build.
Advance planning will help preserve what has taken years to build. Specifically, every business operator should spend some time with an attorney to discuss an estate plan, not just for the benefit of their immediate family, but also for the benefit of employees and customers.
Such a plan should include a method of allowing family members involved in the business to continue operating it, or for key employees to take over the business.
When preparing an estate plan, an attorney should look at the goals of the client. If the goal is to have the business continue in the family, then an attorney should provide for a plan to be created, which specifies how the business will be controlled after the death of the founder. It may also be important to start transferring some of the ownership interest in order to avoid estate taxes.
If the goal of the founder is to provide for the financial security of the founder’s family, an attorney may need to plan for a “buy-out” of the business interest by key employees, which could be funded from operations or through the purchase of life insurance. There are many different plans that can be selected, but what is important is that the business operator selects one.
While I know it is hard for anyone to consider their eventual death, it is a subject that must be considered by all business operators. It does not matter if your business is large or small, it does not matter if there a sole owner or there are many shareholders, an appropriate plan should be made. A specific example of the need to consider the possibility of death for a sole owner is negotiating a lease due to the fact that if the business is personal and would not survive the death of the operator, there needs to be a provision for cancellation upon the death of the operator, which will avoid costing the family thousands of dollars for the remaining lease term.
To avoid problems, seek the assistance of an attorney who is qualified and who you trust. Remember, an attorney should be willing to meet with you to discuss your needs for a short period of time (about a half hour) for you to determine if you like the attorney and if the attorney can be of assistance to you.