If you own a business, there’s a good chance it’s one of your most valuable assets--if not the most valuable. Not just a major source of income, your business is also the culmination of a dream and in some cases the livelihood of others.
For this reason, it makes good sense to put together a business estate plan that covers your company’s assets, trade secrets, and organizational structure so that forces beyond your control don’t slow it down.
Business estate planning covers all the bases against your death or that of a partner, but also if a business partner decides to move on. In either case, you’ll want to begin by deciding what happens in such situations. A buy-sell agreement is a formal document that protects all the partners in a business when one of them passes away or decides to sell their share of the company, and makes it clear whether there’s a successor to that partnership or it just gets dissolved.
Estate planning for a business with two or more partners requires that everyone put their heads together to decide how this all shakes out to the benefit of the partnership. A successor might be chosen, for example, like the descendant of the deceased partner, or the owners might choose against that option if it’s not in the best interests of the business. Some estate planners recommend that partners take out life insurance policies that can be used to buy the deceased partner’s shares from his or her estate.
This is also a good time to take stock of what the business is worth and what value you as the owner bring to it. If you liquidated everything--inventory, computers, furniture--what would you be left with? And what about business relationships and arrangements that keep everything spinning, like vendors, bank accounts, lines of credit, and so on? If you’re the only person running the business, you might forget about all the online bank accounts, email accounts, file sharing sites, social networking accounts, and such that would be inaccessible if you weren’t there to furnish the usernames and passwords. A documented plan in place to preserve and transfer this knowledge can prevent a perfectly healthy business from taking an unfortunate tumble.
Overall, estate planning for a business is just as important, if not even more important than estate planning for an individual. Depending on the size of your company you might consider speaking with an attorney to get a fresh set of eyes looking at your situation. Because life is full of constant changes, you’ll want to revisit your business estate plan every few years to account for marriages, children, and the ever-changing situations of your company’s stakeholders.