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An experienced personal injury lawyer can inform you of your rights if you or someone you know has been injured by a distracted driver.
Starting with your initial idea, building and owning a business can be an exciting venture from day one. Developing a proper business plan, securing financing, marketing, paying taxes and all of the other small, but significant, details will surely be some of the most challenging yet rewarding work that you will perform in your lifetime. But have you ever thought about the role you will play in your business after your life is over? Developing a comprehensive estate plan provides a well-developed plan to ensure that your life’s work survives even after you pass.
As a small business owner, you spend an incredible amount of time working to establish and grow your business throughout your life. It seems only reasonable that you should take the time to create a plan for your business upon your death. When talking to your estate planning attorney, consider these tips for your business:
Avoid Exorbitant Taxes
Upon death, the IRS may claim estate taxes on all assets of your estate. Reviewing your personal and business assets as part of a comprehensive estate plan can help minimize the tax exposure of your estate and facilitate the an organized transition or sale of the business.
To avoid taxes, there are various IRS sections that can help. One section, Section 6166, will allow your loved ones more time to pay the tax by paying the estate tax in 10 annual installments. Another, Section 303, will allow your family to redeem your stock with very little tax penalties. You should talk to your family about these tax sections and determine if your business will be eligible. Creating a plan and instructions for your survivors will help them to navigate these filings.
Create a Buy-Sell Agreement
If your business is owned by more than one person, a buy-sell agreement dictates how the partnership or LLC will be distributed upon one owner’s death or incapacitation. Without one, family members may be stuck owning a business they do not want, and partners may be forced to work with people they did not intend.
A buy-sell agreement puts in place a plan that when an owner passes, their shares must be bought out by the other owners at a fair market price. These agreements can even establish a sale price so that family members know what they can expect to receive from the sale. In a buy-sell agreement, you can also block certain individuals from having a role in the business.
Purchase a Life Insurance Policy
It is possible that you have no intention of your business surviving after your passing. Referred to as owner-dependent businesses, some small businesses provide a stable income for the owner, however, there is not a lot of money reinvested in the business and exponential growth is not the intent. If you depend on your business for income and you have a family, when you pass, that income will be gone. A term life insurance policy can serve as income replacement for your family.
Additionally, a life insurance policy or irrevocable life insurance trust (ILIT) can help your partners with the capital they might need to purchase your shares if you have a buy-sell agreement.
As a small business owner, you owe it to your family and your business to make plans for your passing. Dealing with their loss will be complicated enough without navigating the intricacies of small business taxes and sales. Discuss your options with an experienced estate planning attorney and leave your legacy the way you would want it.
If you or someone you know is a small business owner, contact The Estate Planning Department at The Law Offices of Young Wooldridge, LLP. An estate planning attorney at The Law Offices of Young Wooldridge, LLP can inform you of legal options you may not know you have.
