If you are a business owner, the thought may pop into your head at some point: What will happen to my business when I pass away? Fortunately, through proper planning, you can ensure that your business lives on in the right hands.
Including Your Business in Your Will: What You Need to Know
By having a will, you can pass your business on to someone who you trust to properly run it. On the other hand, if you do not have a will or do not include your business as part of it, you will lose say in who your business gets passed on to following your death.
What Happens if You Don’t Leave Your Business in Your Will?
If you leave your business out of your will, the business will ultimately fall into the hands of whoever the state decides should run it. In most cases, the state will give control of the business over to close family members, such as spouses or children.
So what are the disadvantages of not including your business as part of your will? There are several, including the following:
- Not having control over who becomes owner of your business
- Your business may fall into the wrong hands
- Your family may not have knowledge or interest in running the business
Not having control over who becomes owner of your business
As referenced above, if you do not include your business in your will, you have no say in who it gets passed onto following your death. It is in your best interest to include your business as part of your will, so you can ensure that it ends up with the person you want running it.
Your business may fall into the wrong hands
On a related note, your business could fall into the wrong hands. Perhaps it gets passed onto family members who do not get along, which can threaten the future of the business you worked hard to create.
Your family may not have knowledge or interest in running the business
Simply put, some people just do not possess the necessary knowledge to run a business – or run the type of business that you have. Additionally, it’s entirely possible that your family members simply have no interest in your business or running it after you pass away.
What is Business Succession Planning?
If you own a business, you may have heard the term business succession planning. Business succession planning is the process of ensuring that there is a plan to allow a business to still operate should the owner become incapacitated or pass away.
What if Your Business is Co-Owned?
It is important to note that for co-owned businesses, it is a wise idea to have a buy-sell agreement in place. A buy-sell agreement will help determine what happens to your share of the business should you pass away.
A buy-sell agreement can call for various circumstances, including the following:
- The business passes on to your family
- The business has the opportunity to purchase back your share from your family
- The purchase of life insurance for the purpose of buying back your share from your family when you pass away
For assistance creating or updating your estate plan, we are here to help. Contact us today to learn more about our estate planning and elder law services.
For more information regarding various estate planning and elder law topics, visit our resources page, where you will find previous blog posts, newsletters and our informative webinar series.