Estate Planning For Small Business Owners
When you plan your estate as a small business owner you have to look at things differently than people who are not in business for themselves. In many cases the business may be your most significant asset, so when you are planning your estate you have to decide how to make the most of it. This is a very interesting subject, because many business owners who begin to formulate a longterm financial plan recognize that their intentions for the future have a great deal of impact on their decision making along the way.
For this reason it is important to decide whether you intend to deep the business intact and pass it along to the second generation so that they can continue to run it, or whether you plan on selling it. If you are passing it on you will want to focus on strengthening the foundation with reinvestments. Should you plan on selling the business marketability will be your primary concern.
Those who would like to keep the business in the family would do well to identify the successor or successors as soon as possible and let them know your plans. If the business rather suddenly falls into the lap of a successor who is not fully prepared its ongoing viability may be placed into jeopardy. Only 30% of family owned businesses make it through the second generation, and just 15% survive the third, so it is more challenging to maintain a family owned business over multiple generations than it may appear.
Another factor to consider if you are keeping the business in the family is how you are going to provide balanced inheritances. If you have two children and you are going to leave the business to one of them, how do you provide for the other? One option would be to take out a life insurance policy for the value of the business naming the child who is not going to inherit the business as the beneficiary.
If you have not yet begun to consider how to maximize the value of your business as a part of your legacy you may want to get started sooner rather than later, because the decisions that you make today will invariably impact what is possible in the future.
