Does your business depend on you to operate? If so, you may want to consider a few estate planning tips before forgoing the overall planning.
Business Owner Estate Planning in Raleigh
An owner dependent business is one run solely by the owner. The owner generally has no plan to continue its operation after his or her retirement or death. In this situation, it is likely that your business and your personal wealth, and even the assets of your immediate family, are tied together. In order to ensure that your family is taken care of in the manner you choose, you will need to create a plan outlining what will happen to the business and to your personal assets.
- An owner dependent business is one that may end when the owner retires or dies. There are special circumstances that apply to this type of business that should be considered in an estate plan. In this series, we are taking a look at tips for creating a plan that encompasses a variety of situations.
- Organizing the finances in a business so that it is maximizing profitability while in operation is a standard business practice, but when planning to close a business upon retirement or death of the owner, a different strategy may be needed. Some business owners may want to reinvest less into the business as they get older or closer to retirement. If you know the business will be closing in a few years, you may want to retain more revenue rather than spend more. This strategy can help you increase profits so that you will have more income to rely upon retirement or more to go towards your heirs upon your death.
- If the business provides a service to customers that will be abruptly stopped or cut short at the owner’s death, then it may be in the owner’s best interest to have liability insurance that will not end when the business closes. Depending on the statute of limitations, a customer could sue for goods or services not provided. It is best to be covered for that period of time. An attorney can provide insight into how to best plan for this scenario.
- Another option you can include in your estate plan that may prevent lawsuits is to have an alternate plan in place should your business close. You can have information for current clients on where to go to have their service completed, or where to go for goods they may have purchased from you regularly. A good business owner will want to ensure their clients are taken care of even after the business has closed in order to protect their business’ assets and their own reputation.
- Documenting the intent to close the business at the owner’s death is important when planning for the taxes that will need to be paid on the owner’s estate upon his or her death. If the business brings in a steady income year after year, you may be able to calculate how much will need to be paid and plan for it accordingly so you can plan how much your heirs will actually be left with, and not leave them with a hefty tax bill that won’t be covered by your assets.
- Some business owners take out a life insurance policy that will help cover any issues with liquidity, which will help pay for any business fees or debts that will need to be paid. A business may close at the owner’s death, but there will be accounts that will need to be resolved.
Klish and Eldreth | Estate Planning in Raleigh NC
Remember, estate planning is important. It’s a way to ensure your loved ones are cared for after you’ve passed. It’s also a way to distribute your belongings to specific loved ones as well. It’s important that one not pass without this document. Doing so can result in a court case that will leave your loved ones stuck in probate court. This could be not only time consuming but expensive as well.
Regardless of whether you're married, single, wealthy, childless or a parent, it's important for all adults to have an estate plan and the proper documents in place at the beginning of each year. If you're ready to begin planning your estate contact our attorney, today.