If you are determined to have things planned out well in advance, there’s a good chance that you have made out your personal will. You’ve included everything of value and to which of your heirs the items and/or property will fall. There’s just one thing you may have forgotten to do, and that’s determining what will happen to your business/company.
Why Have Business Estate Guidelines?
It’s understandable why you may not have considered the future of your business in end-of-life terms. Maybe it took a long time to build your company and you just didn’t think it would survive or thrive. Maybe you thought you’d become so successful with it that someone would want to buy the company from you. There really are a lot of possibilities, good outcomes, and pitfalls in owning your own business, which is probably why you hadn’t considered what to do with it in the end.
Business estate guidelines exist to help surviving family members and heirs make good choices about your company. You establish these guidelines so that the business either continues under new management, or it stops being a business. The right thing to do, of course, is determined how the business will continue, particularly if you have at least a handful of employees that depend on you for an income.
DIY the Business Estate Guidelines or Hire a Lawyer?
It’s tempting to write out a plan for your business in the event of your passing. However, you are not fully familiar with what state laws say about owning and operating a company and how it should be handled after your death. If the company is doing well, it could be seized upon by government agencies, creditors, etc., seeking to take apart what you worked so hard for when you were alive.
A lawyer well versed in business estate guidelines and planning can walk you through what the state and federal laws say about different courses of action. The lawyer can help you decide what to do with your company and create plans of action for how to run it. It’s akin to writing a will, but it’s meant to direct the people in your life who stand to inherit the business.
When Your Business Is Part of Your Personal Estate
When your company operates on your personal property or is tied into your personal property such as a sole proprietorship or an LLC (I.e., limited liability corporation). In these cases a lot of personal property and personal cash flow has gone into starting the business and helping it grow. The intent at the beginning is to recuperate the investment over time and/or avoid higher taxes under commercial estate laws.
If your business is somehow tied to personal property, then things revolving around your business estate are a little more complicated. It may not be possible for heirs to simply sell off the business. Guidelines need to be in place to manage this tricky situation, and the guidelines have to be legal within the bounds of the law.
Property on Which Your Business Operates
Another aspect of business estate planning has to do with the land on which the company or business operates. If you bought the land and building on it, it is considered an asset for tax and probate courts. If you rent it, then only business as the entity itself is something you have to plan for. If your situation falls under physical ownership of commercial real estate, you do have to make plans for how this will be sold or passed on to someone else.
Rather than an heir, the commercial real estate and/or business entity is passed to a partner. If you have a partner, this is a perfectly acceptable and legal way to ensure that the company continues. You may also set the guidelines for a partner acting as owner/operator until an heir comes of age and can run the company in your previous position.
As you can see, there are many decisions to be made and a lot of legal paperwork to draw up to make sure your business is in good hands after you are gone. Talk to your lawyer to make everything as crystal clear and legal as possible.