Penny Wise or Pound Foolish
When it comes to estate planning for your business, many owners
think “Oh, my family knows what to do when I die” or “I just want something
simple.” When questioned further, it almost always turns out that the initial
response is a result of the fear of a large legal bill or fear of the unknown.
However, as certain as death and taxes is the certainty that if left
unaddressed, the transfer of business ownership will always cost more both
monetarily and in terms of stress for those you love. What appears on the
surface as “simple” to the business owner with historical knowledge of the
company and its operations is anything but simple to the family and co-owners
of the deceased business owner. Only once have I had a client tell me that he
purposefully wanted to leave a mess for his family after his death. Obviously,
that is not the norm.
Proper planning for your business succession necessarily
involves more planning than the average Will, but it doesn’t have to be overly
complicated either. If you are the sole owner of your business (whether a sole
proprietor or as an entity), it is still necessary to address how the
transition will take place after death in order to avoid having the assets of
the business (if a sole proprietor) or the shares/unit interests in an entity
go through the probate process and create a public record of the value of the
business. However, when you have co-owners, planning becomes even more crucial.
How do you intend to purchase the equity the spouse/family of the deceased
co-owner? How will you fund the replacement of your co-owner? Do you want to
place a different value on the buy-out in case of death or disability as
opposed to divorce or termination of employment? These are very important
questions and ones that can be addressed by meeting with your attorney and
other trusted advisors such as your CPA to begin the discussion and navigate
Remember, starting the discussion is half the battle. We can
help discuss various triggering events and various valuation methodologies and
payout scenarios to preserve cash flow for use in death, disability, divorce,
termination or any other trigger that may fundamentally affect your business.
It’s that time of year again and as you make your plans to
address year-end tax planning, remember to also address the issues of business
succession planning and make sure that you aren’t an owner that creates a mess
for your family!
If you would like to learn more about this topic, please
contact: Lesley A. Weigand, Esq. at email@example.com.