Business Planning
There comes a time when almost every small business owner contemplates the future of his or her business. Because “the business” typically is a substantial asset, an owner must address a number of estate planning issues that will affect the future stability of the company. A business succession plan is a comprehensive look at the estate planning picture that can include everything from shareholder buy-sell agreements to management plans and any other documentation that will help ensure the smooth operation of the business. While traditional estate plans are designed with tax minimization in mind, business succession planning, in addition to such considerations, is aimed at maintaining the future health of the business.
There is a need to protect family members and executors from the devastating effect of a business owner’s death. If the business is either a proprietorship or partnership, it must cease operation upon the death of an owner or partner. Although a partnership agreement generally will provide for the continuation of the partnership by the surviving owners, it is also important that some provision be made for the acquisition of the deceased in the same interest. A sole proprietorship cannot be continued in the same manner as can a partnership. If proprietor assets are not specifically bequeathed to, say, a child who has been identified as the successor to the decent, they will pass under the general provisions of the will. During the probate process, the executor would be responsible for operating the business, which could result in business losses and lost value. To address this and other potential problems, a business succession plan is critical.
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