When you were a teenager, you planned to go to college. While you were in college, you planned to graduate. And when you worked at your first internship, you planned to one day have your own business in Salem. Now that you have put the “open” sign in the window and opened your doors to the public, it is time to start estate planning.
Many people think that they do not have to worry about putting an estate plan in place until much later in life, but the reality is that none of us know what day will be our last. That is why if you own a business, there is no time like the present to be sure your affairs are in order.
Protect your family and legacy
Estate planning is important for multiple reasons, however the two most important ones are to protect your family and to protect your legacy. Since your business is an important part of your legacy, it is vital to ensure it receives the proper treatment in the instance of your death. Perhaps you intend for the company to pass to your heirs or maybe you prefer that an outside entity purchases it. Regardless of the treatment you prefer, no one will know your wishes unless you make them clear. Hence, estate planning for your business.
Working out a successful transition for your business can require years of planning. This is why it is important to start sooner rather than later. If you intend your business to live on after your death, either in the possession of your heirs or under the ownership of an outside party, it can take time to create a plan that makes your business style and management philosophy clear to the next generation of owners.
If you are sole practitioner, your main goal may be to take out as much profit as possible for your own use and only leave the business liquid enough to continue operations. You may not think much about the business continuing without you. If you have an idea that you want the business to pass to your children one day, a strong business plan and estate plan can ensure the company retains enough equity to be lucrative for your heirs.
Even if you plan for the business to cease operations after your death, you should have a plan in place that addresses how your representative or executor should manage it until it can be liquidated and distributed to your beneficiaries. This might include maintaining insurance on the company, closing out bank accounts, canceling contracts with vendors, and any other activities necessary to close the business. Your estate plan will make both your intentions for the company and the required procedures clear.
If you own a business, it is past time to start the estate planning process. Take the necessary steps today to make your intentions clear for your family and your business, and save your loved ones from unnecessary complications in the event of your death.