Estate planning for business owners is one of the most important but overlooked parts of setting up a business.
Often, folks wait until it’s too late to have conversations about their wishes for their small business after they pass on.
When setting up your business, estate planning for small business owners can be an essential component of preparing for long-term success.
Your business is likely one of your greatest assets, and it’s something you should protect with plans and insurance while you’re alive.
Don’t let all your hard work go to waste after you’re gone. Talking to a local business estate planning lawyer is the first step in helping protect your greatest asset, your business.
At Massingill, we can help you navigate all aspects of estate planning. To help you prepare, we’ve compiled the six top estate planning tips for small business owners.
1: Draft or Update a Will and Estate Plan
A will and an estate plan can be foundational documents for your business. And talking to an estate lawyer is the first step in drafting a solid estate plan for your business.
If you die without a will, figuring out how to pass down your company and its assets can become expensive and time-consuming for your heirs. Make sure you avoid this preventable confusion by putting your will and estate plan into place as soon as possible.
2: Communicate Openly About Your Business Succession Plan
A business succession plan discusses how you want your business run after you’re gone. Talk about your succession plans with your family and business partners.
Succession plans work best when you work with your heirs and partners to put them into place while you’re alive. An experienced Austin, Texas business estate planning lawyer can help you develop your succession plan today.
3: Draft a Buy-Sell Agreement (for Businesses with Multiple Owners)
For a business with multiple owners, creating a buy-sell agreement can help ease confusion after one owner dies. A buy-sell agreement allows any of the following to happen upon your death:
- Your business partners can purchase your interest in the business;
- Your heirs can inherit your share of the business under your will;
- Your interest can be sold to a third party; or
- You can block a third party from purchasing your interest in the business.
Make sure you speak to a lawyer and make your desires known. Having a buy-sell agreement in place as part of your estate plan can help open conversations in multiple-owner businesses.
It can also ease transitions when one owner exits or dies.
4: Focus on Tax Efficiencies
Taxes are one of the biggest concerns for any business owner trying to create an estate plan. One of the key issues in creating a solid plan is reducing the need to sell parts of your business to pay estate tax.
Developing your estate plan with an experienced Texas estate planning lawyer can help you understand your potential liabilities. An estate planning lawyer can also help you understand your options for minimizing those liabilities and protecting your business and your heirs.
5: Confirm You Have Enough Insurance
Life insurance and liability insurance can be a lifesaver for your heirs. Make sure you have enough of both when you’re doing your estate plan for your small business.
You should consider buying enough life insurance so that your heirs or business partners have the liquidity to finalize your business affairs after your death.
It’s also a good idea to pay the liability insurance for a certain period beyond your death. This can help your heirs in the event that a customer or client brings a lawsuit after your death.
6: Maintain Proper Records (and Disclose Where They’re Kept!)
Any estate lawyer will tell you that an estate plan is only as good as the paper it’s written on. Unfortunately, many people write estate plans and then secure them in places where no one can find them. Don’t let this happen to you.
Maintain proper records of your estate planning. Keeping your will and other estate documents with your estate planning lawyer is a great idea. Let your family and business partners (if applicable) know your lawyer’s contact details.
How We Can Help
Our law firm serves Texas businesses like yours who want to prepare for the future.
Attorney Joshua Massingill and his team have helped many Texas small businesses understand their estate planning options. We have abundant experience in estate planning for businesses.
Contact us today to book a consultation to discuss your business’s future. We’re standing by and excited to speak with you.