Most business owners build their businesses with an exit strategy in mind: either cashing it out or passing it on. Whatever your thoughts are for what happens to your business when you retire or die, it is unlikely to happen without a comprehensive plan that aligns your personal and business goals.
If you plan to pass on control of your business to one or more of your children, then you may want to consider giving them direct voting interests through your will or a trust. If you own business real estate that is separate from your primary business, you should establish a mechanism for passing on that real estate to your heirs.
Some things to consider for protecting your business interests in your estate plan include:
Buy/Sell Agreement. If you don’t have one, you need one now. If you do have one, you need to ensure it is up to date and that the valuation mechanism used – appraisal, formula or fixed valuation — will still work for your purposes.
Liquidity. Will there be enough cash flow from the business to still support the business, provide income for your spouse, and pay estate taxes? If not, you need to consider having the business own a life insurance policy or set up an irrevocable life insurance trust to meet these needs.
Authority. Does your will provide your personal representative with the necessary authority to protect and preserve your business interests? More importantly, does your personal representative have the expertise to manage your business interests? This is especially important if you have ownership interests in multiple business entities.
These are just a few of the considerations you need to make when taking the necessary steps to align business planning with estate planning.
This week is National Estate Planning Awareness Week, so take this opportunity to call us at (612) 206-3701 or fill out our contact form today to schedule a business consultation session.
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