Many business founders and entrepreneurs don’t consider the need for an estate and succession plan for the future. The reasons often range from thinking their existing business is “too small” or “too new” to need a succession plan, to not wanting to think about the idea of their own vulnerability to death or incapacitation. Maybe a business owner considers themselves too young to worry about it, or they are so immersed in the day-to-day operations, that they don’t consider estate planning to be a priority.
Whether you fall into one of the above-mentioned categories, or you are ready to take the next steps to plan for the generational future of your business, and the protection of your business assets, you’ll want to be aware of the information we have for you in this post.
Don’t Wait to Let The Courts Decide
Few people want to think about this, but if some catastrophic event were to happen to you tomorrow, and you didn’t have an estate plan, the state courts are responsible for making decisions about who inherits the business, and what happens to your assets. Here are just a few reasons that’s not the right answer:
- The person who inherits your business may not be the one you would have chosen
- It can cause needless in-fighting between family and or business partners, loyal employees, and associates.
- Your estate will likely get tied up for months or years, causing suffering and headaches and possibly putting the future of your business at risk.
- There may be tax consequences and penalties you and therefore your beneficiaries won’t be prepared to handle
- The reputation and legacy of your business will be completely out of your hands and you can’t ensure continuity if you haven’t made plans and put them into practice and into legally binding writing
Due to the pandemic, a growing number of people, especially younger people, are recognizing the value and importance of estate and succession planning now to prevent distressing outcomes for their businesses in the future.
Here are our recommendations for founders and entrepreneurs to examine.
Start Putting Your Ducks in a Row
Startup business owners and entrepreneurs are not alone in needing an estate plan. We’d advise most adults to take immediate steps towards collecting existing documents and creating the necessary legal documentation to make sure your wishes are honored in your absence.
We encourage founders and entrepreneurs to contact business law experts like Smith Barid to help advise you on the legal process. However, that discussion should also start ASAP with your employees and prospective successors— and it should be revisited often so that the communication about your vision and hope for the future of your business is clear, and the transition upon your death or incapacitation is as smooth as possible.
Revisit your Estate Plan Regularly
Again, we recommend this for anybody with an estate plan, however, the fluidity of a growing startup or small business means a good rule of thumb is to revisit your estate plan annually. That may change depending on your individual circumstances, but, especially if you experience major growth within your industry, your assets increase in value, the way you want to distribute those assets changes, or your mission and vision evolve along with your plans for succession. You will want to make sure all those changes and your wishes are documented.
If the value of your estate increases or decreases over time, the way you distribute that value should change with it in order to make sure your beneficiaries are not walking away with a much higher or lower percentage of your total estate.
Know Where to Turn
The estate plan documentation is the core step in protecting the future of your business and its assets. Reach out to the business attorneys at Smith Barid for more clarity on building strategies for the continuity, liquidity, wealth building, and transfer of your business.