Everyone should make plans for their family should the unthinkable happen. This is not difficult, especially when you have an estate planning solicitor to guide you. Making a Will is an essential part of it, although there can be much more to it. But for those who own a business it is a little more complicated because they have to decide what they want to happen to the business and those who work in it, then implement steps to ensure it happens.
If the business is a partnership or has several owners, there must be plans to ensure they are taken care of. One way to do this is to draw up a legally binding buy-sell agreement. This will outline what you want to happen if a partner or co-owner dies, decides to leave or is forced to leave for some reason.
In the agreement will be details about
- who can purchase his or her share of the business
- under what circumstances such as retirement, death or disability and
- what price they should pay such as market value, percentage and so on.
You should also discuss it with your lawyer or legal advisor who will be able to advise you what options are available and how to implement them, what to put in your estate plan and what common estate planning mistakes you should avoid. For instance you could sell the business, close it down or hire someone else to run it as you get older and find it more difficult to keep up the pace.
Discussing what should happen to your business can be difficult if it has been in the family for many years. It’s a good idea to have a lawyer present at such discussions to facilitate matters and point out the legal obligations and ramifications of inheriting a business.
If you create an estate plan while you are young, there will be need to review it on a regular basis when your needs and circumstances change. You may have more children, get divorced, remarry and have more children with your new spouse. This means that there are more people to include in your estate plan or in some cases, fewer people, if they have died or left you.
Your estate plan should include the following information: –
- who is to be the successor
- The type of succession; full or partial
- Changes of personnel and strategies to ensure skills retention
- Any legal considerations
- References to your Will
- How you plan to manage risk
- Strategies for communication
- Financial details such as sale price, income for retirement and implications for taxation.
Remember that early planning not only protects the business you’ve worked so hard to develop, it also protects your family and their futures. That’s really worth planning for.